US Housing Market & Rental Update: Q3 2014 10.2.2014 | Joe Palumbo

My quarterly round-up of news and forecasting from around the US housing markets.

The leading indicators weigh heavy on the positive side as summer ends and the (normal) seasonal slowdown commences. Unemployment is improved at 6.1%, 30-year fixed mortgage rates are up but still reasonable at around 4.1%, gasoline prices are at a four-year low, consumer confidence and consumer spending is up slightly and in September, the Federal Reserve committed to keeping the short-term interest rate untouched in the near term.

For employers, this indicates a generally favorable landscape for relocating homeowners and renters and the business climate in the coming months.

More good news was heard when it was reported that FHA would eliminate a prepayment penalty — the interest rate charge — starting next year. For FHA borrowers who pay off their mortgage before the end of the month, the lender is allowed to charge to the borrower the interest rate costs on the loan from the day the loan is retired until the last day of the month. So, if a borrower paid off the loan on Sept. 10, the penalty would be 20 days of interest payments. That can be hundreds of dollars. Once the change takes effect, on Jan. 21, 2015, lenders will no longer be able to apply that interest charge to the borrower. Given the track record of financing challenges presented post-recession, employers should be aware of this positive news for home buyers.

In July, NAR (National Association of Realtors) ran a feature story of particular interest to mobility professionals. This story, “Best Purchase Markets for Aspiring Millennial Homebuyers,” looked at job growth, inventory, median price, and other factors to identify the 10 housing markets that millennial buyers are most likely to love. These include Austin, Dallas, Denver, Des Moines, Grand Rapids, Minneapolis, New Orleans, Ogden, Salt Lake City and Seattle.

Other markets with strong potential for attracting Millennial homebuyers include Madison, Wisconsin; Nashville, Tennessee; Omaha, Nebraska; Raleigh, North Carolina and Washington, D.C.

In late September, NAR released the following salient points on the market YTD:

  • The median existing-home price2 for all housing types in August was $219,800, which is 4.8 percent above August 2013. This marks the 30th consecutive month of year-over-year price gains.
  • Total housing inventory3 at the end of August declined 1.7 percent to 2.31 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace.
  • The increase in supply is 10% vs. August 2013.

Perhaps the best summary of the US real estate market through mid-year came from the Harvard University Joins Center for Housing Studies The State of the Nation’s Housing 2014 report (June 2014): “With promising increases in home construction, sales, and prices, the housing market gained steam in early 2013. But when interest rates notched up at mid-year, momentum slowed. This moderation is likely to persist until job growth manages to lift household incomes. Even amid a broader recovery, though, many hard-hit communities still struggle and millions of households continue to pay excessive shares of income for housing.”

Providing further evidence of improving real estate market conditions, the August CoreLogic analysis show 45,000 foreclosures were completed in July 2014, a 21.2 percent year-over-year decline from 57,000 in July 2013. By comparison, before the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006.

The national inventory of foreclosed homes fell for the 32nd straight month to just under 650,000 in June. Most of the U.S. has reduced its shadow inventory to pre-recession levels, but the Northeast, Florida and the Pacific Northwest remain elevated.

Although, as CoreLogic points out, 32 straight months of year-over-year decline in the foreclosure rate is cause for celebration, the total number of homes still in the foreclosure process remains almost four times as high as the average in the early 2000s. Additionally:

  • Five states with the highest foreclosure inventory as a percentage of mortgaged homes: New Jersey 5.7%, Florida 4.8%, New York 4.3%, Hawaii 3%, Maine 2.7%.
  • Five states with the lowest foreclosure inventory as a percentage of mortgaged homes: Alaska 0.4%, Nebraska 0.4%, Arizona 0.5%, Minnesota 0.5%, North Dakota 0.5%.

According to summer press releases by the (NAHB) National Association of Home Builders, indicators are mixed.

“While a firming job market is helping to unleash pent-up demand for new homes and contributing to a gradual, upward trend in builder confidence, we are still not seeing much activity from first-time home buyers,” said NAHB Chief Economist David Crowe. “Other factors impeding the pace of the housing recovery include persistently tight credit conditions for consumers and rising costs for materials, lots and labor.”

Regionally, new-home sales fell 30.8 percent in the Northeast, 8.8 percent in the Midwest, and 15.2 percent in the West. Sales were up 8.1 percent in the South, the country’s largest region.
The inventory of new homes YTD stands at a 6.0-month supply at the current sales pace.

Rental Outlook

With renters comprising the largest percentage of mobile employees for most companies, careful attention must be paid to rental demand trends in areas of key interest. According to a recent report from the Harvard University Joint Center for Housing Studies:

  • The rental vacancy rate edged down to 8.3 percent in 2013 and stood at its lowest point since 2000.
  • Rents were up 2.8 percent in 2013, while among professionally managed properties with five or more units, rents increased by 3.0 percent last year, both outpacing overall inflation of 1.5 percent.
  • 2013 recorded the most multifamily rental starts since 1998.

According to just-released data from MPF Research, apartment owners and operators continue to have strong pricing power as quarterly rent growth for new leases in the 100 largest U.S. apartment markets reached a 14-year high, increasing 1.9 percent during the second quarter of 2014. Monthly rents across the nation now average $1,153.

In metros across the Midwest and Northeast, the extreme winter weather sharply curtailed rent growth. But most of those metros, such as Chicago and Boston, saw big rent comebacks and notable price increases as the weather warmed.

Got questions? Email Joe.

Share this Article

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.

Cookie Statement

In order to deliver an optimized user experience, this site uses cookies. To learn more, please see our cookie policy.

Accept & Close

Subscribe to our Newsletter

Subscribe to our newsletter. It's an easy way to stay connected to the latest workforce mobility trends and best practices.