U.S. Housing and Rental Market Update 07.2.2014 | Joe Palumbo

Welcome to my quarterly round-up of news and forecasting from around the US housing markets:

More qualified home buyers are being left on the sidelines simply due to their credit scores. That was the big takeaway from the recent Mortgage Bankers Association (MBA) Expo and Conference, where David H. Stevens, President & CEO of the MBA, warned that the secondary market is negatively impacting mortgage affordability and availability, increasing costs for borrowers and even preventing many from obtaining homes, and stifling a full-blown market recovery.

The current average credit score in America today is about 700, while the average credit score of a borrower with a loan backed by Fannie Mae in Q1 2014 is 741. On top of these strict credit criteria, there are loan level price adjusters, overlays and ever-increasing guarantee fees. In this system, according to Stevens, only those with the most pristine credit can afford a home. This clearly indicates that while credit availability for mortgages may have improved since the recession, homebuyers still face “credit challenges.”

To corporations with mobile workforces, this could have a number of implications, including:

  • an increase in homeowners becoming renters in their destination locations, and, as such, greater need for professional rental services
  • new barriers to relocation, as home owners who can’t afford to buy in the new location may not want to become renters and give up not only significant tax breaks but also the perceived quality of life that home ownership brings

Both of these challenges can thwart your company’s ability to maintain an agile mobile workforce and respond to opportunities as they arise. Two ways to combat this are by offering home purchase benefits that facilitate the home finding/buying process for your valued talent, and helping employees perform due diligence on potential destination communities (via an easy-to-use online service, such as our NextNeighborhood research tool).

On the topic of mortgages, according to the Relocation Directors Council (RDC), monthly mortgage payments remain unusually low, and are still more affordable than at any time since 1981. In a recent National Foreclosure Review, CoreLogic reported the following:

  • The “Seriously Delinquent” rate is at 4.5 percent for first time since September 2008
  • The Foreclosure Rate is back to November 2008 levels
  • There are now 4.31 months worth of distressed homes nationally; the lowest figure in 11 months
  • The five states with the highest foreclosure inventory as a percentage of mortgaged homes are NJ, FL, NY, HI and ME; The five states with the lowest foreclosure inventory as a percentage of mortgaged homes are AK, WY, ND, NE and MN.

CoreLogic also reported that over the first quarter of 2014, national home prices increased by 11.1 percent year over year, and increased by 1.4 percent month over month.

“Limited construction of new homes and low inventories of existing homes for sale contributed to the jump in prices,” said David Stiff, principal economist for CoreLogic Case-Shiller. “Developers remain cautious about building too many new houses until they see stronger demand in their markets.”

Pending home sales improved throughout the first quarter of 2014, according to the National Association of Realtors (NAR). Gains in the Midwest and Northeast offset declines in the West and South. According to NAR, properties have been selling faster through the first quarter of 2014, reflecting the prolonged lag in inventory relative to demand.

Sales of newly built, single-family homes rose 6.4 percent to a seasonally adjusted annual rate of 433,000 units, according to newly released data from HUD and the U.S. Census Bureau. The gain builds on an upward revision of sales numbers reported for the previous month.

On a regional basis, new-home sales rose 47.4 percent in the Midwest and 3.1 percent in the South and held steady in the West. The Northeast posted a 26.7 percent decline. The inventory of new homes for sale increased to 192,000 units, reflecting a 5.3-month supply at the current sales pace.

Rental Outlook

The results of our 2014 Workforce Mobility Survey indicate that renters are outnumbering home owners in some locations, meaning corporate mobility managers will need to be more attuned to rental markets than ever before.

Nationwide, rents are increasing and inventory is low, which makes preparing for a rental finding trip more important than ever. Nearly 65 percent of transferees are renters and there is greater variety in the demographics of renters (i.e., interns, STA, family moves, VIPs), requiring
access to a wider range of rentals.

According to our most recent research the most notable challenges companies are experiencing are:

  • Availability of suitable rentals 72%
  • Increasing rents 50%
  • Shorter duration rentals 41%

A few adjustments to policy can save you renter-related headaches. Consider pre-decision trips and provide paid rental search services 85 percent of respondents to our survey provide paid rental tours and services at the senior level in an effort to expedite the search process.

Our network rental agents (accredited by Weichert) can help transferees prepare a tenant resume and ensure they have the right documents (references) and funds to snap up a rental in a tight market. Encourage the use of the “transfer” clause but be forewarned that landlords in many major markets will no longer accept those clauses.

Rent growth at the national level is expected to reach 2.70 percent in 2014, a very slight dip from 2013’s rent growth of 2.74 percent. The metropolitan statistical areas (MSA) that outperformed in 2013 are expected to maintain the lead for 2014, but should slightly moderate as the year progresses. The Top 5 highest occupancy level MSAs for 2013 were Madison, WI; New York, NY; San Francisco, CA; Portland, OR and Seattle, WA. Nationally, average occupancy is still above 94 percent.

The early part of 2014 has not differed much from what we saw in 2013; effective rent growth remained steady as occupancy continued to increase. However, as new supply is delivered to market, look for effective rent growth to slow beginning in late 2014 on into 2015 as the market works to absorb the new inventory. It’s also likely that occupancy will drop slightly during the next 12 months as once again, excess supply is absorbed by the markets.

Got questions or comments? Send ’em to Joe.

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Written by Joe Palumbo


Joe Palumbo, SRA, is Vice President of Real Estate Services for Weichert Workforce Mobility. He has over 30 years of real estate experience and has been qualified by the New Jersey and New York State Board of Real Estate Appraisers as an instructor of Residential Real Estate. He is a State Certified Residential Appraiser and licensed Realtor and was named to the New Jersey Board of Real Estate Appraisers in 2011.

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