February 2016 Realtor Report

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Information about February 2016 Realtor Report

Published on March 16, 2016

Author: genewunderlich

Source: slideshare.net

1. In Like a Lion? I know the ‘In Like a Lion’ thing usually pertains to weather, but in this case it pertains to whether – whether or not our housing market will live up to past trends and start improving in March. Despite a strengthening employment picture, there’s still a lot of uncertainty about the economy. While a full-blown worldwide recession may not be happening, the U.S. economy isn’t out of the woods yet according to many economists. This has dimmed prospects for a GDP rebound to the 3%+ target range in 2016 in spite of ‘full employment’. This, in turn, has prompted Fed watchers to predict no additional rate increase in March and maybe not until mid-year or beyond. Overseas the immigration issue has kept Europe in turmoil. If borders are tightened up or closed it will put further pressure on Greece’s faltering economy and force EU countries to increase bail-outs to troubled states. With Mid-East unrest leading to continuing high oil production coupled with decreased demand as China grapples with it’s own economic issues, oil prices will remain low for the foreseeable. Continued low oil price, while good for the U.S. consumer, has prompted some major U.S. banks to warn of the impact of bad loans to the oil patch. JPMorgan CEO Jamie Dimon says their bank may need to set aside $1.5 billion in reserves for bad loans. That’s $1.5 billion that won’t be available for other things like mortgage loans or construction loans – not that they’re doing much of that anyway. Given this as background, it’s no wonder legislators are exploring ways to get banks back into the private mortgage lending business. In 2015 the market for mortgage-backed securities known as subprime or Alt-A issued by private financial institutions, as opposed to government-backed agencies, fell 36% from the previous year to $1.67 billion. By comparison, lenders issued $269.1 billion of such bonds in 2003, prior to the housing boom. Without a private-bond market, mortgages will remain harder to get for borrowers who don’t meet government requirements because of weak credit histories or hard-to- document income (self-employed & independent contractors). Its absence also could hurt more stable borrowers if future policy makers decide to pull the government back from lending and there is no private market to take its place. Fannie Mae, Freddie Mac, FHA, VA and other government backed loans currently account for nearly 90% of the secondary mortgage market. On the local front, February wasn’t a bad month with sales up 1% from January and 7% ahead of February 2015 (636 / 686). Pending home sales were up 17% which portends an even better month in March. Median price for the region edged down about ½% from January to February but managed to stay 7% ahead of February 2015 ($288,100 / $309,194). That’s pretty much on par with the rest of the state and slightly better than the rest of the country (5.2%). Coming into the 1st quarter of the year, Riverside County remains among the most affordable areas for first-time homebuyers with some 60% able to purchase an entry-level home. That has lead to a small bump in sales to first-timers to about 32%, but still remains close to the lowest level in the last decade. Affordability for a median price home in the region stands at 39% of households able to purchase compared to 30% for the rest of the state, 25% in San Diego County, 21% in Orange County and 11% in San Francisco. While we’re hoping demand picks up in the spring buying season, without a concurrent increase in available inventory, price appreciation will ramp up, affordability will decline and fewer folks will get to realize their American Dream of Homeownership. Moderation and balance are key – just like we’re seeing in the Presidential race. Moderation and balance? Fat chance!

2. SW Market @ A Glance Southwest California Reporting Period Current Period Last Period Year Ago Change from Last Period Change from Year Ago Existing Home Sales (SFR Detached) February 2016 686 679 636 1% 7% Median Home Price $309,194$310,483$288,100 .5% 7% Unsold Inventory Index (SFR Units) 1,969 2,023 2,378 3% 17% Unsold Inventory Index (Months) 3.4 3.3 4 3% 15% Median Time on Market (Days) 55 55 83 0% 34% Source: CRMLS

3. 0 50 100 150 200 250 300 Temecula Murrieta Lake Elsinore Wildomar Southwest California Homes I-15 Corridor Single Family Home Sales 0 50 100 150 200 250 Menifee Canyon Lake Hemet San Jacinto Perris Southwest California Homes I-215 Corridor Single Family Home Sales

4. $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 Temecula Murrieta Lake Elsinore Wildomar $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 Menifee Canyon Lake Hemet San Jacinto Perris Southwest California Homes I-215 Corridor Median Price Southwest California Homes I-215 Corridor Median Price

5. February 2016 Transaction Value*: Temecula $62,288,493 Lake Elsinore $20,065,326 Murrieta $42,21,6422 Wildomar $6,602,775 Menifee $37,174,385 Canyon Lake $4,333,299 Hemet $23,976,766 San Jacinto $12,781,519 Perris $15,306,054 Total $292,908,102 * Revenue generated by single family residential transactions for the month. January 2016 Transaction Value*: Temecula $46,277,791 Lake Elsinore $18,759,402 Murrieta $49,634,340 Wildomar $5,573,800 Menifee $32,006,144 Canyon Lake $6,657,280 Hemet $28,056,718 San Jacinto $11,929,200 Perris $17,239,300 Total $ 216,133,975 * Revenue generated by single family residential transactions for the month. February Median Price: 2015 2016 % Temecula $384,500 $410,000 6% Murrieta $345,000 $360,000 4% Menifee $289,900 $310,000 7% Lake Elsinore $285,000 $320,250 11% Wildomar $296,000 $354,000 16% Canyon Lake $329,000 $325,000 1% Hemet $215,000 $208,500 3% San Jacinto $214,900 $225,500 4% Perris $270,000 $269,500 ---

6. 0 50 100 150 200 250 300 350 400 On Market (Supply) Pending Closed (Demand) Days on Market Months Supply Absorption rate * 3 5 3 1 8 8 1 1 2 4 8 3 . 2 7 0 % 3 3 7 1 7 7 1 3 1 5 3 2 . 6 9 0 % 3 6 9 1 9 6 1 1 8 5 9 3 . 1 9 0 2 7 1 1 8 5 1 2 5 5 9 2 . 2 9 7 % 2 2 0 1 0 4 5 8 5 6 3 . 8 7 2 % 1 2 7 1 0 3 5 8 5 2 2 . 2 1 1 2 % 1 3 1 9 1 5 2 6 2 2 . 5 1 2 1 % 9 4 1 4 1 3 3 9 7 . 2 3 7 % 6 7 3 5 1 9 6 7 3 . 5 5 1 % Murrieta Temecula Hemet Menifee Lake Elsininore Perris San Jacinto Canyon Lake Wildomar * Absorption rate - # of new listings for the month/# of sold listings for the month February Demand On Market 3% Pending Sales 17% Closed 1% Days on Market --- Months Inventory (3.3 – 3.4) 3% Absorption 10% Month over Month Inventory dropped 3% month over month while sales increased by 1%. Homes remained on the market the same 55 days as last month. While overall our remaining months of inventory increased slightly from 3.3 to 3.4 months, you’ll note that several cities including Temecula, Menifee, Perris and San Jacinto are back under 3 months. Keep in mind that according to national historic norms, 6-7 months is considered to be a market in balance. A market such as ours, where inventories have remained in the 3-4 month range for years now, should, by definition, be a seller driven market marked by rapid price appreciation. To the extent our appreciation has remained in the 5% - 7% year-over-year range, we’re fortunate that we are not currently experiencing a stronger demand. While we would all like to see our home values jump 20% a year for the next five years, I think we all remember where that lead in 2008, and 1994 and 1987 and… Distressed properties as a percentage of all sales dropped to 8%. Under the best of circumstances you can expect about 4% of properties to be distressed in any given year so while we aren't quite back to those pre-recession levels, we’re in pretty good shape. 96% of Temecula sales were in regular, or equity, sales and Lake Elsinore had 97% equity sales. For the first time since 2008, Temecula did not have a single bank-owned-home listed in February. That’s progress!

7. To broaden mortgage access, the U.S. government wants to revive the market that brought the economy to its knees. But years of effort haven’t succeeded in rekindling it. For the eighth straight year, the market for mortgage-backed securities issued by private financial institutions, as opposed to government-backed companies or agencies, was moribund in 2015. The volume of such bonds backed by loans to borrowers with shakier credit histories—known as subprime or Alt-A—fell 36% from the previous year to $1.67 billion, according to Inside Mortgage Finance, a trade publication. By comparison, lenders issued $269.1 billion of such bonds in 2003, before the housing boom. Few lenders or investors expect a return to the boom days, when investors fueled speculative home purchases by borrowers with little chance of paying. But government officials do want private investors to take on a bigger role, and in 2014 the Treasury Department launched an effort with lenders, investors and other mortgage-market participants to diagnose and fix issues restraining the market. On Monday, those involved plan to unveil an outline of principles agreed on by many of the major players to lay the groundwork for a new market. Whether they succeed could have broad implications for the economy and borrowers. Without a private-bond market, mortgages will remain harder to get for borrowers who don’t meet government requirements because of weak credit histories or hard-to-document income. Its absence also could hurt more stable borrowers if future policy makers decide to pull the government back from lending and there is no private market to take its place. One Way to Make Mortgages Easier to Get Government, investors and lenders team up to revive market for mortgage bonds issued by private firms, including bonds backed by subprime borrowers

8. WASHINGTON (February 23, 2016) — Existing-home sales crept forward in January to the highest annual rate in six months, and subpar supply levels propelled price growth to the fastest increase since last April, according to the National Association of Realtors®. The West was the only region to see a decline in sales in January. Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, inched 0.4 percent to a seasonally adjusted annual rate of 5.47 million in January from a downwardly revised 5.45 million in December. Sales are now 11.0 percent higher than a year ago – the largest year- over-year gain since July 2013 (16.3 percent). Lawrence Yun, NAR chief economist, says existing sales kicked off 2016 on solid footing, rising slightly to the strongest pace since July 2015 (5.48 million). "The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints," he said. "Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession." The median existing-home price2 for all housing types in January was $213,800, up 8.2 percent from January 2015 ($197,600). Last month's price increase was the largest since April 2015 (8.5 percent) and marks the 47th consecutive month of year-over-year gains. Total housing inventory3 at the end of January increased 3.4 percent to 1.82 million existing homes available for sale, but is still 2.2 percent lower than a year ago (1.86 million). Unsold inventory is at a 4.0-month supply at the current sales pace, up slightly from 3.9 months in December 2015. "The spring buying season is right around the corner and current supply levels aren't even close to what's needed to accommodate the subsequent growth in housing demand," says Yun. "Home prices ascending near or above double- digit appreciation aren't healthy – especially considering the fact that household income and wages are barely rising." The share of first-time buyers remained at 32 percent in January for the second consecutive month and is up from 28 percent a year ago. First-time buyers in all of 2015 represented an average of 30 percent, up from 29 percent in both 2014 and 2013. All-cash sales were 26 percent of transactions in January (24 percent in December 2015) and are down from 27 percent a year ago. Individual investors, who account for many cash sales, purchased 17 percent of homes in January (15 percent in December 2015), matching the highest share since last January. Sixty-seven percent of investors paid cash in January. According to Freddie Mac, the average commitment rate(link is external) for a 30-year, conventional, fixed-rate mortgage stayed below 4 percent for the sixth consecutive month and declined in January to 3.87 (lowest since October 2015 at 3.80 percent) from 3.96 percent in December. The average commitment rate for all of 2015 was 3.85 percent. Properties typically stayed on the market for 64 days in January, an increase from 58 days in December but below the 69 days in January 2015. Short sales were on the market the longest at a median of 77 days in January, while foreclosures sold in 57 days and non-distressed homes took 61 days. Thirty-two percent of homes sold in January were on the market for less than a month. With homebuyers facing a tough market this spring, NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida, said Realtors® overwhelmingly applauded the recent U.S. House of Representatives passage of H.R. 3700, the "Housing Opportunity Through Modernization Act." "This legislation contains a number of initiatives that put homeownership in reach for more families, including several reforms to current Federal Housing Administration restrictions on condominium financing. Now that the House has overwhelmingly voted in support of the bill, we look forward to working with our industry partners to advance it through the Senate." Distressed sales4 – foreclosures and short sales – rose slightly to 9 percent in January, up from 8 percent in December but down from 11 percent a year ago. Seven percent of January sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 13 percent below market value in January (16 percent in December), while short sales were discounted 12 percent (15 percent in December). Existing-Home Sales Inch Forward in January, Price Growth Accelerates

9. National Association of Realtors 2016 Advocacy Agenda The National Association of REALTORS® (NAR) represents over one million residential REALTORS® and commercial practitioners involved in all facets of the industry as brokers, sales agents, property managers, appraisers and counselors. As the largest professional trade association in the United States, NAR advocates policy initiatives that promote and protect a fundamentally sound and dynamic U.S. real estate market fostering vibrant communities. In 2016, NAR will be focused on the following public policy initiatives: Homeownership & Real Estate Investment Tax Policies The growing federal debt, weak economic recovery, and continued growth of tax complexity have kept tax reform near the top of the national agenda. Members of Congress from both Houses and both parties have expressed a high level of interest in reforming the tax system, and President Obama has also expressed qualified support, especially for corporate or business tax reform. This ongoing debate places a variety of tax laws, including those affecting commercial and residential real estate, under increased scrutiny. •State and Local Tax Deductions(link is external) •Mortgage Interest Deduction •Mortgage Debt Cancellation Tax Relief •Capital Gains(link is external) Credit, Lending, and Insurance Policies Overly stringent lending standards have continued to limit the availability of affordable mortgage financing for credit worthy consumers. Federal policymakers are weighing a number of proposals aimed at creating healthier housing and mortgage markets. Additionally Congress must reauthorize the National Flood Insurance Program to avoid the potential loss of 40,000 home sales each month according to NAR research. •Credit Availability •GSE (Fannie Mae/Freddie Mac) Restructuring, Liquidity and Lending •FHA Lifetime Mortgage Insurance Premiums(link is external) •FHA Condominium Requirements & Financing •National Flood Insurance Reauthorization(link is external) Business Operations Protecting the business operations of members is always a priority for NAR. There are a number of issues before Congress and the Federal Regulatory Agencies that could have a significant impact on the business operations of real estate firms. •Dodd-Frank Act Regulations (TRID Implementation) •Technology Issues (Patent Reform, Net Neutrality, Data Privacy & Security) •Appraiser Independence Regulations(link is external) Commercial More than $1.2 trillion in commercial real estate loans will come due over the next few years, and many of these deals will have trouble getting financing. NAR supports consideration of legislation and regulations to protect and enhance the flow of capital to commercial real estate. •1031 Like-Kind Exchanges •Basel III(link is external) •Lease Accounting •Waters of the United States

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