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Why the Second Half of 2014 Will Be Better Than the First

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The housing market has been sluggish in many markets over the past six months, after last year’s double-digit appreciation. But researchers at the real estate brokerage Redfin say they see signs that the housing market is now edging back to normal. In a new report, they say they expect the market in urban areas to regain its footing over the second half of 2014.

“The second half will not be without its wobbles,” Redfin researchers note on the brokerage’s blog. “The housing market will have to jockey between poor economic indicators and pent-up buyer demand. But the housing market can maneuver around the juggernaut of subpar long-term economic fundamentals, based on the very real difference between this year and any other year post-crisis: Housing is now edging back to normal.”

Here are some signs that that the second half of the year will be brighter for real estate:

Sales are inching up. In 2013, home sales posted the strongest year since the recession, and they’re finally catching up in 2014. Existing-home sales increased 4.9 percent in May to a seasonally adjusted annual rate of 4.89 million. While sales remain about 5 percent below May 2013 levels, the 4.9-percent month-over-month gain in May was the highest monthly rise since August 2011, according to the National Association of REALTORS®. According to Redfin’s analysis, sales are trending up year-over-year in eight out of the 30 markets it tracks, including Atlanta (8.2 percent), Charlotte (8.3 percent), Seattle (2.3 percent) and Oakland (8.6 percent).

Foot traffic shows some signs of rebounding. NAR’s REALTORS® Confidence Index shows that foot traffic eased 1.6 points to 44.5 in May (readings below 50 usually indicate more than half of the 200-some markets are reporting weaker foot traffic than the same month a year ago). But NAR notes in the report the foot traffic index has improved steadily from the “weak spring market” and is now getting “on par with last year.” Indeed, Redfin’s analysis shows the number of customers going on tours with its agents in June was up 27.1 percent from a year ago – that would be bucking typical seasonal trends, which tend to peak in May. “This indicator of buyer demand con tinues to strengthen as we head into the second half of the year,” according to Redfin’s Research Center. “The key question is whether mortgage supply from banks can meet the increase in demand or whether buyers with large amounts of cash on hand will continue to dominate the market.”

Price growth is becoming more sustainable. After double-digit growth last year, home prices are moderating. In May, the median existing-home price for all housing types was $213,400, a 5.1 percent increase over last year. “Rising inventory bodes well for slower price growth and greater affordability, but the amount of homes for sale is still modestly below a balanced market,” Lawrence Yun, NAR’s chief economist, said in a statement releasing May’s existing-home sales numbers. “Therefore, new home construction is still needed to keep prices and housing supply healthy in the long run.”

Housing inventory is inching up slowly. Housing inventories nationwide at the end of May rose 2.2 percent to a 5.6-month supply at the current sales pace, down slightly from 5.7 months in April, according to NAR. Unsold inventory is 6 percent higher than year-ago levels. Redfin’s analysis shows that in 22 of the 30 markets it tracks, there were more homes for sale than last year with the largest year-over-year increases in Riverside-San Bernardino, Calif. (28.1 percent); Phoenix (25.2 percent); and Orange County, Calif. (24.6 percent).

“Though the main long-term drivers of housing activity remain stalled – namely below average growth in median household income, labor force participation, bank lending and household formation – metro markets continue to get a boost from pent-up demand caused by the low inventory that plagued housing for the past two years,” Redfin researchers note.

Pending Homes Sale Surge Nationwide, Highest since 2010

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RE-Insider on 7/14/14 • Categorized as Industry News

While much of this year has proven to be a bust for those of us in the RE industry, recent waves of good news have been emerging. Lately we’ve seen mortgage rates going down, inventory going up and new jobs being created – all signs that an improving market is on its way – and now it would seem that our hopes have come to fruition, as a new study has found that pending home sales have jumped the most since 2010.
According to a study performed by the National Association of Realtors, pending home sales surged more than expected in May, the latest sign a sluggish housing recovery is picking up steam.

Nationwide, signed contracts for previously owned homes jumped 6.1% from April, beating the median forecast of a 1.5% rise and the largest bump we’ve seen in four years!

Additionally, buyers closed deals on 4.9% more previously owned homes in May than April and new home sales jumped 18.6% in May.

“An improvement in sales is likely to continue for at least a few more months, a welcomed reprieve after a significantly slow start to the year,” Sterne Agee chief economist Lindsey Piegza said in a statement. Further gains, Piegza said, will rely on “sustained improvement in income and job creation.

Still, the market isn’t humming like last year. Higher prices and fewer foreclosures have investors and families less likely to strike a deal. Pending sales in May were 5.2% below 2013 levels.

Regardless, this is a change which we can all rejoice.

Does It Cost Too Much to Live in LA?

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w that LA – and most of California for that matter – is an expensive place to live, but what percentage of income is spent on housing here? The answer may surprise you, as a recent study has found that residents of LA spend more of their income on housing than in any other metropolitan area across the nation! The report is the latest evidence of a growing affordability crunch in Southern California’s housing market.
Let’s face it – costs to buy and rent homes have grown far faster than incomes in recent years, pushing more families to spend a greater share of their income to live here.

According to a new study from Harvard University, half of the households in metro Los Angeles spend at least 30% of their income on rent or mortgage payments, the highest rate of 381 metropolitan areas in the U.S. One in four households here spends at least half its income on housing.

But Los Angeles isn’t alone. Seven of the 10 metros with the highest share of “cost-burdened” households are in California, including the Inland Empire, San Diego and Ventura County.

Many economists peg 30% of income as a point at which housing costs start to become burdensome, crowding out other spending. At 50%, it becomes a “severe burden.” Of low-income households that spend at least that much on housing, 39% reported spending less on food and 65% cut spending on healthcare, the report said.

“Pretty much all other necessity spending is getting crowded out,” said Dan McCue, research manager at the Harvard Joint Center for Housing Studies. “Food, clothing, healthcare, you name it. There’s just less to go around.”

Renters are especially squeezed, with 6 in 10 renting households spending at least 30% on housing. Among homeowners in metro Los Angeles, 4 in 10 spend that much, the sixth-highest rate in the country.

In Southern California, the challenge is one both of high housing costs and stagnant wages. Median household income, adjusted for inflation, has fallen 11% here since 2005, while rents have climbed.

“The basic cause of these high cost burdens is weak income growth,” McCue said.