In my last quarterly update, I welcomed the lazy hazy days of summer. In a blink, those days have been replaced by back-to-school nights and shorter days. In the real estate business cycle, the traditional “busy season” begins to cool off and the “winter market” closes in.
As we prepare for the inevitable climate and foliage change that fall and winter bring, we also focus on a presidential election. Looking forward requires looking back and in that regard, the summer of 2016 has returned another positive report for the national real estate market.
The cautious optimist in me is still asking some of the same questions from past quarters. How long will the positive trend last? When will the Fed raise interest rates? Will the election be the catalyst to spur less favorable conditions? How long will the Greater Houston markets show price growth despite the volatile oils markets?
For now, we’ll have to wait to see how things play out. In the meantime, let’s look at some trends and developments of interest to mobile employees (and the companies that move them), as referenced in NAR Research’s September/October 2016 Market Pulse:
- Jobs are growing and interest rates remain low, but tight inventory in many parts of the country continues to drive up home prices, which impacts affordability—especially for first-time buyers who can’t tap home sale proceeds to come up with a down payment. Despite the rise in prices, sellers are reporting faster sales, with homes averaging 36 days on the market, down from 42 days a year ago.
- The median income of first-time home buyers continues to be high enough to qualify for financing, but the margin has been narrowing over the past three years. If the trend continues due largely to escalating home prices, obtaining a mortgage may become more challenging for new purchasers.
- After accelerating to 6.8 percent a year ago, national median existing-home price growth is forecast to slightly moderate to around 4 percent.
Other notable highlights as reported by NAR include:
- Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 0.9 percent to a seasonally adjusted annual rate of 5.33 million in August from a downwardly revised 5.38 million in July. After last month’s decline, sales are at their second-lowest pace of 2016, but are still slightly higher (0.8 percent) than a year ago (5.29 million).
- The median existing-home price for all housing types in August was $240,200, up 5.1 percent from August 2015 ($228,500). August’s price increase marks the fifty-fourth consecutive month of year-over-year gains.
- Total housing inventory at the end of August fell 3.3 percent to 2.04 million existing homes available for sale, and is now 10.1 percent lower than a year ago (2.27 million), having declined year-over-year for 15 straight months. Unsold inventory is at a 4.6-month supply at the current sales pace, which is down from 4.7 months in July.
- The share of first-time buyers was 31 percent in August, which is down from 32 percent both in July and a year ago. First-time buyers represented 30 percent of sales in all of 2015, down from 33 percent in 2014.
- Properties typically stayed on the market for 36 days in August, unchanged from July and down considerably from a year ago (47 days). Forty-six percent of homes sold in August were on the market for less than a month.
- Distressed sales—foreclosures and short sales—were 5 percent of sales in August (lowest since NAR began tracking in October 2008), unchanged from last month and down from 7 percent a year ago
While these are generally positive findings, the drop in the percentage of first time homeowners is a concern for the sustained health of the national market. When these buyers can’t find homes, they typically stay in a rental, shortening the supply of rentals and, in turn, driving up rental prices. With low inventories on the rental and home buying side, there is no relief from the pressure of price appreciation in both categories.
The following update come from Zumper’s National Rent Report for September 2016:
Top Five Rental Markets
- San Francisco, CA rents continued to stabilize this month. While one bedrooms decreased a slight -0.6% to a median price of $3,440, two bedrooms increased just 0.2% to a median price of $4,800.
- New York, NY saw prices drop for both one and two bedroom units. One bedrooms decreased -2.2% to $3,130, while two bedroom prices decreased -1.4% to $3,490. However, there remains a significant gap between New York and the third most expensive rental market, Boston.
- Boston, MA maintained its position as the third most expensive rental market in the U.S., despite a slight -0.4% and a -1.2% decline in one and two bedroom median prices, respectively.
- Washington, DC jumped up two spots in our rankings, overtaking both San Jose and Oakland to become the fourth most expensive rental market in the U.S. One bedroom prices increased 2.8% to $2,200, while two bedroom prices increased 3.4% to $3,080. This increase is particularly notable because Washington, DC was the only city in the top ten to see an increase in both one and two bedroom prices this month.
- San Jose, CA fell to fifth place, after median one bedroom prices declined -3.6% to $2,140 and median two bedroom prices dropped -3.5% to $2,780. This highlights the persistence of the decline in Bay Area rents seen in last month’s national rent report.
Oil – Major Market update:
The year-to-date report from the Houston MLS is a bit surprising. The rise in inventory has done little to suppress the price appreciation and sales activity; it may be that the market has acclimated to the economy. This remains an area that needs close watch but as of today, things are still modestly favorable overall which a plus for companies that do business and manage mobile workforces in Houston metro. Careful pricing and marketing strategies are a must.
Some highlights of the Houston area MLS rebound (which encompasses sales and listing activity for large radius of the major suburbs of Houston including but not limited to Katy, Sugar Land, The Woodlands and Spring) include:
- Single-family home sales rose 8.2 percent with a total of 7,914 units sold —the greatest one-month sales volume of all time
- On a year-to-date basis, single-family home sales are up 1.5 percent;
- Total property sales rose 7.1 percent to 9,319 units;
- Total dollar volume shot up 10.6 percent to $2.6 billion;
- At $225,000, the single-family home median price rose 4.2 percent to an August high;
- Single-family homes months of inventory climbed to a 4.0-months supply;
- Townhome/condominium sales rose 5.1 percent, with the average price up 1.0 percent to $202,669 and the median price up 4.0 percent to $156,000;
- For single family homes Days on Market (DOM), or the number of days it took the average home to sell, edged up to 50 days versus 45 last year.