14 REALTOR® SEP TEMBER/OCTOBER 2014 REALTORMAG.REALTOR.ORG
A Confluence of Positive Trends
After a slow start this year, partly due to the frigidly cold winter, home sales are picking up steam.
Existing-home sales have risen for four
straight months and in July were at the
highest pace of the year, 5. 15 million. Pending contracts point to more gains, too.
Jobs are always important for home
sales, and in the last 12 months they’ve
grown by 2. 6 million. North Dakota,
Texas, Utah, and parts of California are
good examples of job growth leading to
healthy real estate activity. Amazingly,
mortgage rates refuse to rise, even after
the Federal Reserve has started talking
about tightening its monetary policy,
The inventory shortage is also im-
proving. There were 2. 4 million homes
available in July, the highest in two years.
Buyers typically like to view 12 to 15
homes before choosing one, so now it’s
likely they’ll find more options during their
search. New-home construction inventory is also rising as groundbreakings
rise. What’s more, all-cash investors are
stepping away, giving first-time buyers a
better chance to get into the market (see
page 36). Investors made up 16 percent
of all transactions in July, while first-time
buyers comprised 29 percent.
Meanwhile, the damaging stu; is van-
ishing. Distressed property sales—REOs
and short sales—are at their lowest levels
since at least 2008. Only 9 percent of
sales were classified as distressed in July,
down from 15 percent a year ago.
There’s more good news. The funds
from the taxpayer bailout of Fannie Mae
and Freddie Mac have been fully paid
back. In fact, recent profits from the two
companies have become revenue for
the federal government. Meanwhile, the
FHA bailout is on track to be paid back
by year’s end. In addition, the number of
seriously delinquent mortgages is down
from 10 percent a few years ago to just
4. 8 percent in the second quarter.
All in all, the housing market is steadily
improving, and growth potential remains
strong thanks to continuing pent-up demand. For these reasons, we’re forecasting growth in four of the next five years.
( The one down year simply reflects the
reality that data never moves in a straight
line in any direction.) Look for annual
sales to reach well beyond the 5 million
mark in the near future.
Lawrence Yun is
NAR chief economist.
top of mind
contract activity. An index of 100 is equal to the level
of activity during 2001, the benchmark year.
Seasonally adjusted annual rate,
which is the actual rate of sales for the month,
multiplied by 12 and adjusted for seasonal sales di;erences.
Number of existing homes on the market at the end of the month.
Derived from monthly REALTOR® Confidence Index. Results
for July are based on 3,901 responses to 6,000 surveys sent to
large and small real estate o;ces. The survey asks practitioners
to indicate whether conditions are strong (100 points),
moderate ( 50), or weak (0). Some data may be revised
from previous issues.
Demand still exceeds inventory, but more houses are coming on the market. The
improving inventory trend is helping to moderate home price growth, and interest
rates remain historically low. Still, housing a;ordability is expected to worsen in
coming months as income trails price appreciation and monetary policy is tightened.