Home prices rise at the fastest rate of the year

Posted on December 27, 2023 by grim

From CNN:

US home prices hit another record high in October, rising for the ninth straight month

US home prices continued to rise in October, hitting a new record high and marking the ninth-consecutive month of increases, according to data released Tuesday. Together with soaring mortgage rates that month, rising home prices have made this the least affordable housing market in a generation.

Even as mortgage rates lingered above 7% in October, reaching the highest levels in 23 years, historically low inventory continued to push up the price of a home.

Prices rose 0.6% from the month before, according to seasonally adjusted data from the S&P CoreLogic Case-Shiller US National Home Price Index.

Compared to a year ago, the national composite index covering all nine U.S. census divisions reported a 4.8% annual change in October from the year before, up from a 4% change in the previous month.

“U.S. home prices accelerated at their fastest annual rate of the year in October,” said Brian D. Luke, head of commodities, real and digital assets at S&P DJI in a statement.

This marked the strongest national growth rate since 2022.

Part of the reason prices have climbed was because of stubbornly low inventory. People that could absorb higher mortgage rates or who were paying cash competed for the few homes available. Combined with the fear from many buyers that if they don’t buy now, interest rates could increase even more, prices moved higher.
…
Each index — the 10-city, 20-city and National Index — remained at all-time highs, with eight of 20 cities registering all-time highs: Miami, Atlanta, Chicago, Boston, Detroit, Charlotte, New York and Cleveland.

Detroit kept pace as the fastest growing market for the second month in a row, registering an 8.1% annual gain.

San Diego followed with 7.2% annual gains, and New York with a 7.1% gain.

Posted in Housing Bubble, National Real Estate | 89 Comments

Out of reach … forever?

Posted on December 26, 2023 by grim

From NPR:

Most homes for sale in 2023 were not affordable for a typical U.S. household

If you found the U.S. housing market impossible this year you were not alone. In fact, you were in the vast majority, according to a new analysis by the real estate group Redfin.

Just 15.5% of homes for sale were affordable for a typical U.S. household, the lowest share since Redfin started tracking this a decade ago. A home is deemed affordable if the estimated mortgage payment is no more than 30% of the average local monthly income. 

Affordability plunged 40% from before the pandemic, and 21% from just last year. Redfin says spiking mortgage rates were a key reason why.

Normally, higher rates should push home prices down. But Redfin also finds the number of affordable home listings dropped sharply in 2023. That’s partly because many people don’t want to sell now and give up a much lower mortgage rate, and that tight market has helped keep prices high.

Normally, higher rates should push home prices down. But Redfin also finds the number of affordable home listings dropped sharply in 2023. That’s partly because many people don’t want to sell now and give up a much lower mortgage rate, and that tight market has helped keep prices high.

Redfin finds white households could afford far more listings than Hispanic and — especially — Black households, who’ve faced decades of housing discrimination. Only 7% of listings this year were affordable for a typical Black household. 

There were also enormous geographic differences. The biggest drops in affordability were in smaller cities, including Kansas City, Mo., Greenville, S.C., and Worcester, Mass. The report says that’s “because housing costs have relatively more room to rise, and local incomes are often climbing at a fraction of the pace that mortgage payments are.”

Posted in Demographics, Economics, Employment, National Real Estate | 57 Comments

Fitch – NJ is overpriced

Posted on December 22, 2023 by grim

From Fitch:

Homes Prices Remain Overvalued in 88% of the U.S.

Fitch Ratings-New York-20 December 2023: Fitch Ratings estimates that national home prices were 9.4% overvalued for 2Q2023 on a population-weighted average basis and expects overvaluation to remain elevated due to the continued rise in home prices in Q3. 

The increase in Fitch’s overvaluation estimate was driven primarily by the accelerated home prices, as the uptick in overvaluation occurred in more than two-thirds of the metropolitan statistical areas (MSAs) where home prices rose in 2Q2023. Meanwhile, other factors remained comparatively stable, leading to a more moderate increase in the sustainable home price index. 

Overvaluation still dominated nationwide. As of 2Q2023, home prices in 88% of the country’s MSAs were overvalued, with 55% of these areas by 10% or more. The top three overvalued MSAs in the U.S. are Charleston-North Charleston, SC; El Paso, TX; and Camden, NJ.

Fitch attributes the decline in existing home sales to affordability challenges for home buyers due to a persistently high mortgage rate environment and the sustained pressure of elevated home prices. Additionally, a stagnant supply contributes to both rising prices and lower sales volume, further impacting home sales.

Posted in Demographics, Economics, National Real Estate, New Jersey Real Estate | 90 Comments

Home sales tick up, slightly

Posted on December 21, 2023 by grim

From the Real Deal:

Existing home sales rise for first time since May

It was by no means a blizzard of activity, but existing home sales increased from October to November, ending a cold spell for the moribund U.S. market.

Sales of existing homes increased by 0.8 percent from October to November, reaching a seasonally adjusted annual rate of 3.82 million, according to a report from the National Association of Realtors. Year-over-year, existing home sales dropped 7.3 percent from 4.12 million a year ago.

The metric excludes new construction, which is gaining market share as for-sale inventory remains historically low.

While the jump in activity was modest, and occurred only in the Midwest and South, a monthly gain is unusual for this time of year and another positive sign for a housing market hampered by reluctant sellers and elevated mortgage rates. The nationwide increase in existing home sales came despite a 7.2 percent monthly decrease in the West and a 2.1 percent drop in the Northeast.
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Home prices continued to edge up. The median sale price of existing homes rose 4 percent year-over-year in November to $387,600. All four regions tracked in the report posted annual sale price increases, led by a 5.3 percent gain in the West.

For-sale inventory at the end of last month was 1.13 million homes, falling 1.7 percent from October to return to September’s level. Inventory was up 0.9 percent from a year before.

Unsold inventory amounted to a 3.5-month supply at last month’s sales pace, also down from October but up from a year ago.

Posted in Demographics, Economics, Employment, National Real Estate | 61 Comments

Too Soon?

Posted on December 20, 2023 by grim

From CNN Business:

America may have done the impossible: Avoid a recession

For the past couple years, all the smart money was on a US recession taking place sometime before the next presidential election. To be clear: That absolutely could still happen. In the world of economics, nothing is certain. But it’s looking extremely unlikely that America’s economy will go into reverse anytime soon.

Around this time last year, some of the most closely watched economists were all predicting a recession. As the year went on, they revised their forecast, instead penciling in a mild recession. But like the Federal Reserve, many began ditching the recession narrative altogether.

Which raises the question: How in the world did America avoid a recession? The Fed spent the past 20 months doing everything in its power to slow America’s economy down to combat runaway inflation with full awareness that it could inadvertently cause millions of Americans to lose their jobs.

It hiked its key interest rate target 11 times over that span — and at a historic pace. The Fed hadn’t raised rates so much and that fast since America’s last inflation crisis 40 years ago — and in 1980, the Fed hiked rates so high that it plunged the economy into the deepest recession since the Great Depression.

The Fed also sold off trillions of dollars of bonds and other debt it had bought up over the years, sapping demand for Treasuries, which pushed yields higher. Consumer loans, mortgages, credit cards and other lending rates tied to those yields surged, devastating America’s housing market, which is on pace for its worst year since 1993.

Yet nearly two years into the Fed’s campaign to slow America’s economy, it may have done the impossible: rein in inflation without plunging us into a recession.

Posted in General | 111 Comments

Like the good ol’ days

Posted on December 18, 2023 by grim

From Business Insider:

HENRYs are turning to a little-known and risky type of mortgage as home prices soar 

With home prices and mortgage rates sky high, potential homeowners — even those with deep pockets — are looking for ways to ease the cost burden.

Some ​​Americans who are high earners, but not rich yet, known as HENRYs, are opting for unusual interest-only mortgages that boost affordability, at least in the short-term. These loans allow the borrower to pay just interest and none of the principal for a certain number of years. The loans are generally reserved for more affluent buyers of higher-end property who can afford a sizeable down payment and have sufficient money saved.

There are some attractive benefits of this kind of loan. They offer lower monthly payments at first, which allow borrowers to invest the money they would otherwise spend to pay off their house on other, higher-return investments. They also allow borrowers whose incomes are expected to rise in the future to buy more expensive homes than they otherwise would be able to afford.

There are also higher risks than a conventional mortgage. Borrowers won’t gain equity in their home, beyond the down payment they made. They’re on the hook for potentially higher mortgage payments in the future, and if their home value declines, they could lose the equity they have or the ability to refinance. Some interest-only loans require borrowers to pay off the entirety of the principal once the interest-only period ends.
…
When Sam, whose last name is known to Business Insider, and his wife were looking to buy a home in Brooklyn in the spring of 2022, the homes they liked largely exceeded their budget, which was between $2–$2.5 million.

But one day they got an unexpected opportunity. Their neighbors directly across the street from their rental apartment in Carroll Gardens were about to put their three-bedroom brownstone on the market. The house was exactly what they were looking for, except it was priced at $3.1 million. But their neighbors offered to sell it to them before putting it on the market. Without broker’s fees, the home would cost about $2.8 million.

Sam, a self-employed marketing consultant, was initially concerned the house was just too risky and expensive of a purchase. The future of New York City real estate was still somewhat unclear as many who fled the city when the pandemic hit were slow to return.

But when First Republic bank offered him and his wife a 40-year interest-only loan, they sprung for it. They paid a 20% down payment and locked in a low mortgage rate of between 2.6 and 2.7% for the first 10 years of the loan, and a guarantee that their rate would double at that point.

Posted in Economics, Employment, Housing Bubble, National Real Estate, NYC, Risky Lending | 112 Comments

Prediction Season!

Posted on December 16, 2023 by grim

From the APP:

Realtor.com released 2024 forecast for top housing markets

Coming in at No. 23 was the Allentown-Bethlehem-Easton, PA-NJ area, with forecasts of :

  • 2024 existing home sale counts year over year: 2.2 percent
  • 2024 existing home sale counts vs 2017-19 average: -13.2 percent
  • 2024 existing home median sale price year over year: 5 percent
  • 2024 existing home median sale price vs. 2017-19 average: 63.3 percent
  • Combined 2024 existing home sales and price growth: 7.3 percent

The next New Jersey market on the list was New York-Newark-Jersey City, NY-NJ-PA, coming in at No. 75.

  • 2024 existing home sale counts year over year: -10.8 percent
  • 2024 existing home sale counts vs 2017-19 average: -37.5 percent
  • 2024 existing home median sale price year over year: 3 percent
  • 2024 existing home median sale price vs. 2017-19 average: 47.7 percent
  • Combined 2024 existing home sales and price growth: -7.8 percent

The final New Jersey market in the Top 100 is Philadelphia-Camden-Wilmington, PA-NJ-DE-MD, at No. 80.

  • 2024 existing home sale counts year over year: -13.4 percent
  • 2024 existing home sale counts vs 2017-19 average: -36 percent
  • 2024 existing home median sale price year over year: 3.8 percent
  • 2024 existing home median sale price vs. 2017-19 average: 48.5 percent
  • Combined 2024 existing home sales and price growth: -9.6 percent
Posted in Demographics, Economics, Employment, Housing Bubble, New Jersey Real Estate | 47 Comments

Room to run

Posted on December 15, 2023 by grim

From Business Insider:

The Fed brought some relief to the housing market

The Federal Reserve’s forecast for easing monetary policy in 2024 fueled stocks to new highs, dragged bond yields lower, and sparked a fresh wave of exuberance across Wall Street. 

But the housing market is also getting some needed relief from the forecast of lower interest rates in 2024. 

While the Fed kept its benchmark rate unchanged on Wednesday, its Summary of Economic Projections nodded to the potential for as many as three rate cuts next year. Daily rates on the 30-year fixed mortgage dipped to 6.82% on Thursday, according to Mortgage News Daily, the lowest since May.
…
Yet it is still possible a sharp drop in mortgage rates throws the housing market further out of whack in the near term, with lower rates opening the gates to a flood of demand before more supply comes online. 

“If rates come down too much — and mortgage rates follow — we’ll see the current supply-demand imbalance exacerbated as pent-up demand gets released into an undersupplied market, putting upward pressure on home values – and inflation,” Jack Macdowell, chief investment officer at Palisades Group, wrote in a note Wednesday. 

“Until mortgage rates drop below 6%, it is unlikely that pent-up deferred sales will meaningfully contribute to supply,” Macdowell added.

Real estate group Redfin has forecasted mortgage rates to drop into the mid-6% range in 2024, and Wednesday’s Fed move reinforces that prediction.

Strategists at Goldman Sachs, meanwhile, wrote in a note prior to the Fed meeting Wednesday that housing starts and home prices will crawl higher in the coming years, while existing home sales will remain flat. The bank has a no-recession scenario as part of its base case, which should keep prices propped up. 

Posted in Housing Bubble, Mortgages, National Real Estate | 97 Comments

Party Time

Posted on December 14, 2023 by grim

From Barrons:

Dow Soars 500 Points to Record Closing High

The Dow Jones Industrial Average sprinted to a new record closing high after the Federal Reserve announced its latest monetary policy decision.

The Dow gained 512 points, or 1.4% to close at 37090. The S&P 500 rose 1.4%, while the Nasdaq Composite jumped 1.4%.

The Fed is holding rates steady since inflation is dropping and the central bank wants to avoid putting the economy into a recession.

The Fed also said it will depend on economic data to make further interest rate decisions, acknowledging the economic damage from high rates likely hasn’t fully played out yet.

When it comes to rates, markets are “fading the previously dominant “higher for longer narrative,” wrote Ali Hassan, Portfolio Manager at Thornburg Investment Management.

Posted in Economics, National Real Estate | 95 Comments

No unintended consequences here…

Posted on December 13, 2023 by grim

From the NJ Monitor:

N.J. Senate approves penalties for discriminatory real estate appraisals

Senate lawmakers approved a bill Monday that would create steep penalties for real estate appraisers who undervalue homes because of the owner or buyer’s protected characteristics, with Republican critics saying they worry the bill’s disregard of appraisers’ motives would lead to unintended consequences.

The bill, which cleared the Senate in a narrow 22-11 vote, would fine appraisers who discriminate on the basis of protected characteristics like race, sex, or gender. Bills need 21 yes votes to clear the Senate.

“As recent research has borne out, appraisals are systematically lower for Black and Latino families than for white families across the country,” said Sen. Nellie Pou (D-Passaic). “This law will help us further protect families from this discrimination and also contribute to lowering the racial wealth gap in our state.”

Violators would pay $10,000 on a first offense, $25,000 on a second, and $50,000 on a third.

The bill would also require violators to make restitution equal to the cost of the discriminatory appraisal and attend an anti-bias seminar. Those who violate the bill’s provisions a second time would have their appraisal licenses, certificates, or registrations suspended for 30 days. That penalty rises to full revocation for appraisers who commit a third offense.

Two Republican lawmakers cautioned against the legislation, warning it would push appraisers out of the same neighborhoods the bill seeks to aid.

“A $10,000 fine — I don’t know any appraiser that’s going to take this on, which means that banks are going to have to say, ‘I don’t know what to do,’” said Sen. Bob Singer (R-Ocean). “Though the intent is wonderful, the implementation just doesn’t work.”

Sen. Holly Schepisi (R-Bergen) said she worries the bill would levy steep penalties on well-meaning appraisers who unintentionally or unknowingly issue a discriminatory appraisal. The risk created by that state of uncertainty would keep appraisers out of communities that have historically faced discrimination, she said.

“The cost of doing business and providing appraisals in certain communities is going to be deemed to be impossible without potentially being hit with an unknowing bias,” Schepisi said.

Posted in Demographics, Economics, Politics | 97 Comments

Pretty sure this won’t end well, whichever way it goes

Posted on December 12, 2023 by grim

From Yahoo Finance:

‘Stay Out Of The Markets’ — Kevin O’Leary Urges Government To Not Get Involved In Housing — Says New Bill That Would Ban Hedge Funds From Buying Homes ‘Is Very, Very Bad And Destructive’

Real estate investors still account for a significant number of single-family home purchases, buying 26% of all homes sold in June 2023, according to a recent report. These numbers have remained fairly unchanged over the past two years, and are causing some lawmakers to call for banning large investors from purchasing homes that could otherwise be a homeowner’s primary residence.

Earlier this month, Arrived, a Jeff Bezos-backed real estate company, announced a new fund aimed at acquiring single-family homes. U.S. Rep. Ro Khanna (D-California) responded to this news in a post on X saying, “The last thing Americans need is a Bezos-backed investment company further consolidating single-family homes and putting homeownership out of reach for more and more people. Housing should be a right, not a speculative commodity. Congress must pass my Stop Wall Street Landlords Act.”

Since the congressman’s post, the issue has garnered more attention from lawmakers, and a new bill was introduced on Dec 4 — the End Hedge Fund Control of American Homes Act of 2023. Khanna’s Stop Wall Street Landlords Act calls for additional taxes to be placed on institutional investors that buy single-family homes, while the new bill calls for a complete ban on hedge funds from buying homes and forcing them to sell off their current holdings over a 10-year period.

During a recent appearance on Fox Business’s “The Big Money Show,” Kevin O’Leary shared his stance on the proposed legislation.

“Very bad idea. Very bad policy when you try to manipulate markets or sources of capital,” O’Leary said. “I don’t care if they’re Democrats or Republicans, whoever they are, stay out of the markets. Let the markets be the markets.”

O’Leary argues that Wall Street provides a needed funding source for the housing market and offers the lowest cost of capital.

The author of the new bill, U.S. Sen. Jeff Merkley (D-Oregon), argues that institutional investors are driving up home prices and rents.

“The housing in our neighborhoods should be homes for people, not profit centers for Wall Street. Yet, in every corner of the country, giant financial corporations are buying up housing and driving up both rents and home prices,” said Merkley in a press release. “It’s time for Congress to put in place common-sense guardrails that ensure all families have a fair chance to buy or rent a decent home in their community at a price they can afford.”

Posted in Demographics, Economics, Housing Bubble, National Real Estate, Politics | 9 Comments

Making Money

Posted on December 9, 2023 by grim

From CBS News:

The U.S. states where homeowners gained — and lost — equity in 2023

For the millions of Americans who own their homes, their properties are typically their biggest source of wealth. The good news? Those assets have grown in value over the past year thanks to rising home prices. 

The typical American homeowner saw their home equity rise by $20,000, or 6.8%, through the end of the third quarter compared with a year earlier, according to a new analysis from real estate data firm CoreLogic. 

Despite a fierce headwind in the form of the highest mortgage rates in two decades, average home prices have jumped about 9% this year, according to the National Association of Realtors. That has boosted the value of homeowners’ equity, or the difference between how much a home is worth and the remaining amount due on a mortgage. 

Posted in Housing Bubble, National Real Estate, New Jersey Real Estate | 121 Comments

Don’t let the money leave

Posted on December 8, 2023 by grim

From ROINJ:

Murphy appoints new task force designed to cut property bills in half for New Jersey seniors

A new task force charged with cutting property tax bills in half for New Jersey seniors has been created, according to a Monday announcement from the Governor’s Office.

Designed to offer recommendations to implement the new StayNJ property tax relief program, six of New Jersey’s highly regarded public servants have been assigned to review all of the state’s existing property tax relief programs and present a report to Gov. Phil Murphy and the Legislature no later than May 30, 2024.
…
“StayNJ will be transformative for all families planning for the future, with historic property tax relief for seniors,” Coughlin said. “We need to ensure this program launches smoothly, with a seamless application process and system for benefit distribution. That’s why I am pleased to appoint Mayor McCormac to the StayNJ Task Force. His depth of experience will be invaluable. His service as state treasurer and his 17 years as mayor — particularly his innovative initiatives for Woodbridge seniors — make him uniquely qualified for this role. Mayor Mapp, the joint legislative appointment, brings even more expertise to the table with his decades of experience in local government, public finance and his training as a Certified Public Accountant.”

Under StayNJ, eligible seniors with a gross income under $500,000 will receive a credit of 50% on the annual property tax bill for their principal residence, up to $6,500.

Posted in New Jersey Real Estate, Politics, Property Taxes | 146 Comments

Riskiest Markets

Posted on December 7, 2023 by grim

From Atom:

Housing Markets Facing Greater Risk Of Downturns Clustered In California, New Jersey And Illinois

ATTOM, a leading curator of land, property, and real estate data, today released a Special Housing Risk Report spotlighting county-level housing markets around the United States that are more or less vulnerable to declines, based on home affordability, foreclosures, underwater mortgages and other measures in the third quarter of 2023. The report shows that California, New Jersey and Illinois have the highest concentrations of the most-at-risk markets in the country, with the biggest clusters in the New York City and Chicago areas, as well as central California. Less-vulnerable markets are spread mainly throughout the South, Midwest and Northeast.

The third-quarter patterns – derived from gaps in home affordability, underwater mortgages, foreclosures and unemployment – revealed that California, New Jersey and Illinois had 33 of the 50 counties considered most vulnerable to potential drop-offs. Those concentrations dwarfed other parts of the country at a time of mixed market trends when home prices and homeowner equity improved but home affordability and foreclosure activity worsened.
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The metropolitan areas around Chicago, IL, and New York, NY, as well as central California, had 21 of the 50 U.S. counties considered most vulnerable in the third quarter of 2023 to housing market troubles (from among 578 counties with enough data to analyze).

The 50 most at-risk counties included three in New York City (Kings and Richmond counties, which cover Brooklyn and Staten Island, and Bronx County), six in the New York City suburbs (Bergen, Essex, Ocean, Passaic, Sussex and Union counties, all in New Jersey) and seven in the Chicago metropolitan area (Cook, De Kalb, Kane, Lake, McHenry and Will counties in Illinois, and Lake County in Indiana).

The five in central California were Fresno County, Madera County (outside Fresno), Merced County (outside Fresno); San Joaquin County (Stockton) and Stanislas County (Modesto).

Elsewhere, the top-50 list included three each in northern California, southern California and the Philadelphia, PA, metro area. They were Butte County (outside Sacramento), El Dorado County (outside Sacramento) and Humboldt County (Eureka) in northern California and Kern County (Bakersfield), Riverside County and San Bernardino County in southern California. Those in the Philadelphia area were Philadelphia County, Gloucester County, NJ, and Camden County, NJ.

Posted in Demographics, Economics, Housing Bubble, New Jersey Real Estate | 80 Comments

Ringwood is prime

Posted on December 6, 2023 by grim

From the NYT:

Ringwood, N.J.: A Rural Lifestyle 40 Miles From New York City

154 CUPSAW DRIVE | A four-bedroom, one-bath house, built in 1939 on 0.31 acres, listed for $640,000. Credit Laura Moss for The New York Times

With its wooded hills, winding roads and shimmering lakes and reservoirs, Ringwood, N.J., feels more like the Catskills than like a New Jersey suburb. That rural charm was what attracted Linda and James Pentifallo when they decided to leave their longtime home in River Edge, in Bergen County.

“My wife really wanted to be on a lake, but I thought, ‘We’re not going to be able to afford that,’” said Mr. Pentifallo, 64, the owner of the Ridgefield Hobby store in Ridgefield, N.J.

Earlier this year, however, they bought a three-bedroom log cabin on Cupsaw Lake — one of several lakes in Ringwood — for $599,000. Their new home reminds Ms. Pentifallo, 65, a retired office manager, of the lakefront cabin her family owned in the Adirondacks.

“We go out on the deck and have a cocktail and enjoy the view,” Mr. Pentifallo said. “What’s great about Ringwood is its location: You’re in the country, and yet you’re not far from the city.”

Orly Steinberg, an agent with Keller Williams Village Square Realty in Ridgewood, said that many buyers start out searching in pricier northern New Jersey towns, only to realize that “they can afford a nice house and get more bang for their buck” in Ringwood. Others, she said, discover the borough during weekend outdoor adventures.

“During the pandemic, 30 percent of our clients came out of the city,” said Ms. Steinberg, a longtime Ringwood resident. “Everybody was hiking the trails. That brought people up, and a lot of them bought permanent homes, and some weekend homes.”

Posted in General | 62 Comments