News from National Association of Realtors (NAR)

The National Association of Realtors (NAR) Pending Home Sales Index is a measure of contracts signed on existing homes. It's a forward-looking indicator of where sales may be a few months out when those contracts go to closing. Monday we got the good news that Pending Home Sales in June were 1.5% ahead of May's upwardly revised reading. This reverses a three month decline, and the NAR now predicts existing home sales will end the year at about 5.56 million, up 2.6% from 2016's 5.45 million. The median existing home price is forecast to end the year up 5%, just below 2016's 5.1% gain.

The NAR's chief economist commented: "Market conditions in many areas continue to be fast paced, with few properties to choose from, which is forcing buyers to act almost immediately on an available home that fits their criteria." Freddie Mac's chief economist concurred, "the spoiler is the lean inventory... nationally, just over five months of supply." Yet he remains positive: "A decade after the Great Recession, the housing market is rebounding. House prices today are higher than they were at the peak in the summer of 2006, near record low mortgage rates have boosted housing demand, and sales volume is robust."

No AC? No Problem: 5 Cooling Tips for Summertime

If air conditioning your home seems like a far-off dream, you’re not alone. Each summer, thousands of Americans battle the heat in their homes, especially at night. Below are a few helpful tips to help you stay cool all summer.

Point that fan out. It might feel good to have air blow over you as you sleep, but to cool your room quicker without AC, grab a boxy window fan and point it out, not in. This will pull warm air from the room and push it outside.

Reverse ceiling fans. In the summer, program your ceiling fans to run counter-clockwise. This will pull hot air up and out, instead of blowing the warm air on you.

Choose the right bedding. When it comes to staying cool during those hot summer nights, cotton is the way to go. Choose a light sheet made of 100 percent cotton, and avoid polyester and synthetics at all costs. 

Frosty bottle. You’ve heard of a hot water bottle, right? Well these helpful toe warmers can also keep you cool during the summer. Stick the bottle in the freezer, and slide it between your sheets before bed.

Make use of your bathroom fan. Have a bathroom right off the bedroom? Turn on the overhead fan and leave the door open to let the fan pull the rising hot air out of your room as you sleep.  

Pending Home Sales Increase Despite Inventory Shortages:

After declining for three straight months, pending home sales reversed course in June as all major regions, except for the Midwest, saw an increase in contract activity, according to the National Association of Realtors®.

The Pending Home Sales Index*, www.nar.realtor/topics/pending-home-sales, a forward-looking indicator based on contract signings, climbed 1.5 percent to 110.2 in June from an upwardly revised 108.6 in May. At 0.5 percent, the index last month increased annually for the first time since March.

Lawrence Yun, NAR chief economist, says the bounce back in pending sales in most of the country in June is a welcoming sign. "The first half of 2017 ended with a nearly identical number of contract signings as one year ago, even as the economy added 2.2 million net new jobs," he said. "Market conditions in many areas continue to be fast paced, with few properties to choose from, which is forcing buyers to act almost immediately on an available home that fits their criteria."

Added Yun, "Low supply is an ongoing issue holding back activity. Housing inventory declined last month and is a staggering 7.1 percent lower than a year ago."

Yun does note that there could potentially be a sliver of increased hope in the months ahead for prospective first-time buyers, who continue to struggle reaching the market¹. Sales to investors last month were the lowest of the year (13 percent), which helped push all cash transactions to 18 percent – the smallest share since June 2009 (13 percent).

"It appears the ongoing run-up in price growth in many areas and less homes for sale at bargain prices are forcing some investors to step away from the market," said Yun. "Fewer investors paying in cash is good news as it could mean a little less competition for the homes first-time buyers can afford. However, the home search will still likely be a strenuous undertaking in coming months because supply shortages in most areas are most severe at the lower end of the market."

Heading into the second half of the year, Yun expects existing-home sales to finish around 5.56 million, which is an increase of 2.6 percent from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 5 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

The PHSI in the Northeast inched forward 0.7 percent to 98.0 in June, and is now 2.9 percent above a year ago. In the Midwest the index decreased 0.5 percent to 104.0 in June, and is now 3.4 percent lower than June 2016.

Pending home sales in the South rose 2.1 percent to an index of 126.0 in June and are now 2.6 percent above last June. The index in the West grew 2.9 percent in June to 101.5, but is still 1.1 percent below a year ago.

Real Estate & Mortgage Update

We got hit with a variety of housing market news last week, starting with Monday's reveal that Existing Home Sales took a bit of a breather in June, dipping 1.8%. But they're still at a healthy 5.52 million unit annual rate, and up by 0.7% over a year ago. Economists expect real estate to maintain its overall upward trend of the last few years. Of course we do have the headwinds of tight supply and rising prices, with median existing home prices hitting new record highs two months in a row. But demand stays strong, as 54% of the listings sold in June were less than a month old.

Tuesday we learned New Home Sales moved up 0.8% in June to a 610,000 unit annual rate, putting them up 9.1% versus a year ago. The supply increased to 5.4 months, aided by a 3,000 unit gain in inventories. Plus, the median price of new homes sold was down 3.4% versus last year, indicating builders are moving in the right direction. More evidence of this came with the news the homeownership rate increased in Q2 and is up 0.8% from a year ago, to a three-year high. The chief economist of an national real estate site believes "we may have turned a corner when it comes to the steep dive in homeownership we've seen over the past 10 years."

Americans Upbeat on Housing:

A recent survey by Digital Risk showed that over half of homeowners believe the housing market in their region and nationwide has improved. It also found that the majority of homeowners (91%) and renters (83%) view home ownership as a good investment. The survey of 1,057 U.S. homeowners and 509 renters was conducted between May 26 and June 2.

Confidence in the housing sector is being driven by a noticeable increase in home values. Eighty-seven percent of homeowners have seen their appraisal values holding or increasing, while just 12% saw a decrease. Sixteen percent saw gains of more than 20% in value.

Barriers to the housing market remain, however. Forty percent of renters said they could not afford the down payment. Insufficient income was cited by 37% of respondents, while 33% said they preferred renting to ownership. When asked what would make the decision easier to purchase a home, 40% percent cited debt forgiveness, 36% said a life event such as marriage or children and 31% percent said lower credit requirements would push them into the market.

Home ownership is still popular.

 The National Association of Realtors (NAR) 2017 National Housing Pulse Survey reports 84% of respondents believe buying a home is a wise financial decision. The NAR president summarized the findings: "Building equity, wanting a stable and safe environment and having the freedom to choose their neighborhood remain the top reasons to own a home." The survey also revealed buyers need to be educated about down payment options: 40% think they have to put at least 15% down. Black Knight reported total "tappable" (lendable) equity increased $695 billion in the last year.

The chief economist at property information firm CoreLogic says "the market continues to benefit from improved economic growth." Their CEO adds, "the rebound in the U.S. housing market continues to gather steam." A national listing site found that the biggest homeowner regret was not choosing a larger home, while the biggest renter regret was continuing to rent instead of buying. Credit scores are rising, as the national average FICO score hit 700 for the first time in history. FICO's vp for scores and analytics said a 700 score is considered "very good credit." Better credit scores can get buyers more favorable mortgage terms.

Pending Home Sales Sluggish as Low Supply Rears Its Head

Pending home sales were sluggish in April as low supply reared its head, down 1.3 percent in the National Association of REALTORS^® (NAR) Pending Home Sales Index (PHSI). The PHSI posted 109.8 in April, down from 111.3 in March. The Index is based on contract signings.

"Much of the country for the second straight month saw a pullback in pending sales as the rate of new listings continues to lag the quicker pace of homes coming off the market," says Lawrence Yun, chief economist at NAR. "REALTORS^® are indicating that foot traffic is higher than a year ago, but it's obviously not translating to more sales.  

The West fared best in April, with pending home sales up 5.8 percent to an Index reading of 100.0, though still down 4.2 percent from one year ago. The Midwest saw a 4.7 percent decrease in the Index to 104.4, while the South saw a 2.7 percent decrease to 125.9, and the Northeast, a 1.7 percent decrease to 97.2.

Scarce supply will remain the status quo, according to Yun, unless more homes are made available, especially from the investor side.  

For more information, please visit www.nar.realtor