2014 11 realtors confidence index 2014-12-22

8/10/2019 2014 11 Realtors Confidence Index 2014-12-22

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REALTORS CONFIDENCE INDEXReport on the November 2014 Survey

NATIONAL ASSOCIATION OF REALTORS

Research DepartmentLawrence Yun, Senior Vice President and Chief Economist


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Table of Contents

SUMMARY ............................................................................................................................................... 1

I. Market Conditions ................................................................................................................................. 2

Market Conditions Held Steady in November 2014 ................................................................................. 2

Confidence about 6-Month Outlook Improved ......................................................................................... 2

REALTORS Buyer and Seller Traffic Indexes Indicate Flat Market in November 2014 ..................... 6

Home Price Growth Continued to Moderate in November 2014 ............................................................. 6

REALTORS Expect Modest Price Growth in the Next 12 Months ...................................................... 7

Properties Were Typically on the Market at 65 Days in November 2014 ................................................ 8

II. Buyer and Seller Characteristics ......................................................................................................... 10

Sales to First Time Buyers: 31 Percent of Sales .................................................................................... 10

Sales for Investment Purposes: 15 Percent of Sales ............................................................................... 12

Second-home Buyers and Relocation Sales ............................................................................................ 12

Distressed Sales: 9 Percent of Sales ........................................................................................................ 13

Cash Sales: 25 Percent of Sales ............................................................................................................ 15

First time Home Buyers Who Put Down Low DownPayment: 66 Percent......................................... 16

International Transactions: 1.6 Percent of Residential Market ............................................................. 17

III. Current Issues .................................................................................................................................... 18

Credit Conditions Slowly Easing ........................................................................................................... 18

Reasons For Not Closing A Sale in November 2014 .............................................................................. 18

IV. Commentaries by NAR Research ...................................................................................................... 19

Latest Industrial Production .................................................................................................................... 19

Lenders Tighten Modestly In 2014 Q3 ................................................................................................... 21

Identifying Areas Attractive to Baby Boomers ....................................................................................... 22


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SUMMARY

The information provided by REALTORS about their confidence in local marketconditions in November 2014 indicated that market expectations were broadly steady inNovember 2014 compared to October 2014 and more modest compared to a year ago. The

REALTOR Confidence Index-Current Conditionsfor single family homes registered near 50,a level that indicates an equal number of respondents with strong and weak outlook. However, REALTORS were generally more optimistic about the market outlook for the nextsix months, theREALTOR Confidence Index-Six-month Outlookfor single family homes at 60.An improving jobs market, the decline in the 30-year mortgage rate to about 4 percent, andmore inventory may account for the uptick in expectations.

REALTORS reported on market conditions. First-time home buyers appeared to beslowly re-entering the market with the share of first-time homebuyers at 31 percent, up from 28percent a year ago. The drop in 30-year mortgage rates to about 4 percent since the middle of theyear and the improving job market may be underpinning this development. Investors continued

to account for a smaller share of the market, at 15 percent. REALTORS continued to reportthat obtaining financing remains difficult for many buyers although there are a few reports thatmore buyers are getting qualified for financing (AR, AZ). The increase in mortgage insurancepremium payments for FHA-insured loans continued to be reported as an added financial strainfor first-time buyers. Obtaining FHA financing for condominiums (typically the entry points forhome ownership) continued as a major issue; many condominiums were reported as not meetingFHA eligibility requirements. Inventory has been increasing, but REALTORS reported thelack of affordable and good houses on the market. The uncertainty about the floodinsurance rate increase continued to hold down activity in coastal states. Properties stayed longeron the market, typically at about two months. Respondents expected modest price growth in thenext 12 months, with the median expected price growth at 3 percent.

November 2014 REALTORS Confidence Index Survey Highlights

Nov 2014 Oct 2014 Nov 2013

RCICurrent Conditions: Single Family Sales /1 49 50 59

RCI- 6 Month Outlook: Single Family Sales /1 60 56 64

RCIBuyer Traffic Index /1 43 43 56

RCI-Seller Traffic Index /1 35 38 43

First-time Buyers, as Percent of Sales (%) /2 31 29 28

Sales to Investors, as Percent of Sales (%) 15 15 19

Cash Sales, as Percent of Sales (%) 25 27 32

Distressed Sales, as Percent of Sales (%) 9 9 14

Median Days on Market 65 63 56

Median Expected price growth in next 12 months (%) 3.0 3.0 3.7

/1 An index of 50 indicates a balance of respondents having weak(index=0) and strong (index=100)expectations. An index above 50 means there are more respondents with strong than weak expectations. Theindex is not adjusted for seasonality effects./2 NARs 2014 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers,33 percent were first-time homebuyers. The HBS surveys primary residence home buyers, while the monthly RCISurvey surveys REALTORS and captures purchases for investment purposes and vacation/second homes.


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30-year mortgage rate to about 4 percent, and higher inventory may have accounted for therebound in positive expectations for the single-family market. Expectations about the marketfor townhomes and condominiums remained broadly weak. REALTORS continued to reportabout the difficulty of obtaining FHA financing for condominiums, typically the entry point forhomeownership.

The following graphs show theREALTOR Confidence Index-Six-month-Outlook bystate 3 as well as employment growth, a key driver of housing demand. Across many states, theindex was greater than 50, which means that the number of respondents who have a strongoutlook outnumbered those with weak outlook. The strongest outlook for single family

homes was strongest in North Dakota (red). The markets for townhomes and condominiumsremained generally weak (below 50) , except in the District of Columbia, North Dakota,Colorado, Texas, and Florida where demand was broadly strong. These states areexperiencing strong job growth. In the the case of Florida, demand from retirees and foreignbuyers is adding an extra boost.

3 The market outlook for each state is based on data for the last 3 months to increase the observations foreach state. Small states such as AK,ND, SD, MT, VT, WY, WV, DE, and the D.C. may have less than 30observations.

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REALTORS Confidence Index - Six Month Outlook--

as of Nov 2014 RCI Survey

(50="Moderate" Outlook)

SF Townhouse Condo


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REALTORS(c) Confidence Index: Outlook in Next Six Months for Single-Family Homes

Based on Sep 2014-Nov 2014 RCI Surveys

REALTORS(c) Confidence Index: Outlook in Next Six Months for Townhouses



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REALTORS(c) Confidence Index: Outlook in Next Six Months for Condominiums


Non-farm Employment

Year-on-Year Growth in Oct 2014


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REALTORS Buyer and Seller Traffic Indexes Indicate Flat Market in November 2014

Buyer traffic remained at about the same pace in November compared to October but wasbroadly flatter compared to a year ago. The Buyer Traffic Index registered at 43 (43 in October2014; 56 in November 2013). Seller traffic remained broadly weak with the Seller Traffic

Index at 35 ( 38 in October 2014; 43 in November 2013). An index below 50 indicates thatmore REALTOR respondents viewed traffic conditions as weak compared to those whoviewed conditions as strong.

Obtaining financing under tighter underwriting guidelines and the lack of affordablehomes were reported as the major constraints to homebuying. In coastal areas, uncertainty aboutthe flood zone insurance rates continued to weigh down the market.

NAR also tracks data on the number of properties shown by REALTORS usingSentrilock, LLC data. The index based on Sentrilock data also declined to 61 in October 2014(65.7 in September). Showings need not necessarily translate to sales, but foot traffic has a strong

correlation with future contracts and home sales.

Home Price Growth Continued to Moderate in November 2014

Home prices are still rising, but at a slower pace. Approximately 53 percent ofREALTOR respondents reported that the price of their averagehome transaction was higherin November compared to a year ago (56 percent in October 2014; 63 percent in November2013). The increase in home prices has slowed. The median home price of an exisiting home asof October 2014 was $208,300 ( $209,100 in September 2014; $197,500 in October 2013).

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REALTORS Indexes of Buyer and Seller Traffic--

as Nov 2014 RCI Survey

(50="Moderate" Conditions)

Buyer Traffic Index Seller Traffic Index


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REALTORS Expect Modest Price Growth in the Next 12 Months

With rising inventory and the strong price recovery since 2012, REALTORSresponding to the November 2014 survey expected home prices to increase modestly in the next12 months, with the median at about 3 percent. The map shows the median expected pricechange in the next 12 months by the state of REALTOR respondents in the Sep Nov 2014surveys4. No state had a median expected price growth above 5 percent.

States with the most upbeat price expectations (orange) include California, Nevada,Oregon, Washington, Wyoming, Colorado, North Dakota, Texas, Michigan, Florida, Georgia,

Tennessee, Massachusetts, Rhode Island, and the District of Columbia-- states that have strongjob growth and that are attractive to millennials and retiring baby boomers (see Section IV.Commentaries)5.

4 In generating the median price expectatation at the state level, we use data for the last three surveys to haveclose to 30 observations. Small states such as AK,ND, SD, MT, VT, WY, WV, DE, and the D.C. may have less than30 observations.

5 http://www.realtor.org/news-releases/2014/07/nar-identifies-best-purchase-markets-for-aspiring-millennial-

homebuyers

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Percentage of REALTOR Respondents Reporting Price

Change from a Year Ago--as of Nov 2014 RCI Survey

Higher Lower Unchanged


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Median Expected Price Change of REALTORS in Next 12 Months, By State


Properties Were Typically on the Market at 65 Days in November 2014

Properties are staying longer on the market. Properties that closed in November weretypically on the market at 65 days (63 days in October 2014; 56 days in November 2013)6. Shortsales were on the market for the longest at 116 days (150 days in October 2014 ; 120 days inNovember 2013) . Foreclosed properties were on market at 65 days (68 days in October 2014;59 days in November 2013). Non-distressed properties were on the market at 63 days (61 daysin October 2014 ; 55 days in November 2013).

Approximately 32 percent of REALTORS reported that properties were on the marketfor less than a month when sold (33 percent in October 2014;35 percent in November 2013).

6 This is the median days on the market. A median of say 30 days means that half of the properties were onthe market for less than 30 days and another half of properties were on the market for more than 30 days.


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II. Buyer and Seller Characteristics

Sales to First Time Buyers: 31 Percent of Sales

First-time homebuyers accounted for 31 percent of existing home sales in November (29percent in October 2014; 28 percent in November 2013 ).7Data indicated a pickup of purchasesfrom first-time buyers in November, likely a result of the improving job market and the declinein interest rates to 4 percent.8There were some reports that there are now more homebuyersqualifying for financing (in AZ, AR). Still, for many buyers, access to financing remains a hurdlefor a variety of reasons: buyers cannot meet the credit score requirements to obtain a mortgage,are not able to make the required downpayment, or are not able to pay the effective highermortgage insurance premiums for FHA-insured loans or risk-based adjustments for GSE-guaranteed loans9. The recent announcement by the GSEs to accept loans with 3 percentdownpayment is aimed at increasing access to financing by eligible borrowers. Another majorissue for most first-time homebuyers is that home price appreciation has outpaced wage growth,

making homes less affordable. REALTORS commented on the difficulty of obtaining FHAfinancing for condominiums, which are typically the starter homes for first-time buyers.

7

First time buyers accounted for about 33percent of all homebuyers based on data from NARs 2014Profileof Home Buyers and Sellers. This is a survey of primary residence homebuyers and does not capture investorpurchases but does cover both existing and new home sales. TheRCI Surveyis a survey of REALTORS abouttheir transactions and captures purchases for investment purposes and second homes for existing homes..8 The margin of error is about +/-2 percent at a 95 percent confidence level.

9 For FHA-insured loans, the upfront mortgage insurance premium is 1.75 percent of the base loan amout,

and the annual premium is 1.35 percent for 30-year loans with LTV of 95 percent or more . For GSE-backed loans,the upfront loan level price adjustments is as low as 0.25 percent for borowers with FICO score of 740+ for 60%loan-to-value mortgages and as high as 3.5 percent for for borrowers with FICO score of less than 620 and 90-95%loan-to-value mortgages.

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First Time Buyers as Percent of Market*--


*Based on most recent sale of the month of REALTOR respondents.


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About 31 percent of buyers were 34 years old and under, typically the age-group of first-time home buyers (28 percent in October 2014; 24 percent in November 2013).

About 38 percent of buyers were renters, a group that includes first-time homebuyers.

26% 25% 24% 28% 24% 29% 29% 28% 31%

52% 49% 53% 46% 51% 47% 48% 47%46%

22% 26% 23% 26% 25% 24% 23% 25% 24%

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Age Distribution of Buyers for Sales Reported by REALTOR

Respondents-- as of Nov 2014 RCI Survey

Age 34 and under Age 35-55 56+

Source: NAR, RCI Surveys

36% 38% 37% 38%

55% 54% 54% 53%

9% 9% 9% 9%

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Living Status of Home Buyers at Time of Home Purchase

for Sales Reported by REALTOR Respondents--

as of Nov 2014 RCI Survey*Lives with parents, relatives, or friendsLives in own home

Rents an apartment or house

* Based on the most recent sale of the month of REALTOR respondents.


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Sales for Investment Purposes: 15 Percent of Sales

Approximately 15 percent of REALTORS reported that their last sale was forinvestment purposes (15 percent in October 2014; 20 percent in November 2013). SinceJanuary of this year , the share of sales for investment purposes has declined from the historical

average of about 20 percent in recent years. One reason is that there are fewer distressedproperties, typically of interest to investors. Fewer investor buyers means first-time, relocation,and trade up/trade down buyers are facing less market competition and pressure to bid up prices.

Second-home Buyers and Relocation Sales

Purchases for vacation/second home purposes and for job/business relocation purposeshave been reported as relatively constant since 2010. About 10 percent reported a sale to a buyerof a second home , and 13 percent reported a sale to a relocation buyer who moved due to a job-related change.

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Sales to Investors as Percent of Market*--


*Purchase of property for investment purposes.* Based on most recent sale of the month

of REALTOR respondents.


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Distressed Sales: 9 Percent of Sales

With rising home values and fewer foreclosures, sales of distressed sales have fallensharply compared to the magnitude in the wake of the Great Recession. In November 2014,distressed sales accounted for 9 percent of sales: 6 percent of reported sales were foreclosedproperties, and about 3 percent were short sales10. Fewer distressed properties listed on themarket explains to some degree why investment sales have been on the decline.

10 The survey asks respondents to report on the characteristics of the most recent sale for the month.

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Second-Home Buyers as Percent of Market*--


*Based on most recent sale of the month of REALTOR respondents.

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Relocation Buyers as Percent of Market*--


*Based on most recent sale of the month of REALTOR res ondents.


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Foreclosed property sold at a 17 percent average discount, while properties sold as shortsales sold at an average of 13 percent discount. For the past 12 months, properties in aboveaverage condition were discounted by an average of 10-12percent, while properties in belowaverage condition were discounted at an average of 13-20 percent.

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Distressed Sales, As Percent of Sales Reported by

REALTOR Respondents*-- as of Nov 2014 RCI Survey

Foreclosed Short Sale

Foreclosed: 6% Shortsale: 3%

* Based on most recent sale of the month of REALTOR respondents.

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Mean Percentage Price Discount of

Distressed Sales Reported by REALTOR Respondents*

(in %)--as of Nov 2014 RCI Survey

Foreclosed Shortsale

%



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Cash Sales: 25 Percent of Sales

Approximately 25 percent of REALTOR respondents reported that their lasttransaction was a cash sale (27 percent in October 2014; 32 percent in November 2013). Theshare of cash sales has declined from an average of about 30 percent. This appears to be tied tothe decline in the share of purchases for investment purposes as well as the decline in share ofsales of distressed properties. Foreign clients, and buyers of second homes and distressedproperties are more likely to pay cash than firsttime home buyers. Less than 10 percent offirst-time homebuyers make an all cash purchase.

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Above average Average Below average

Mean Percent Price Discount by Property Condition

of Distressed Sales Reported by REALTOR

Respondents --Average for Dec 2013 - Nov 2014

Foreclosed Short sale

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Cash Sales as Percent of Market*--as of Nov 2014 RCI Survey



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First time Home Buyers Who Put Down Low DownPayment: 66 Percent

The majority of first-time home buyers obtaining a mortgage financing who make alow downpaymentappears to be uptrend. Among first-time buyers reported to be obtaining amortgage in the months of SeptemberNovember 2014, about 66 percent made a downpaymentof 6 percent or less. 11 This is a decline from the 77 percent figure in early 2009, but animprovement from the 61 percent figure at the beginning of 2014.

In November 2014, the government sponsored enterprises (Fannie Mae and FreddieMac) announced the acceptance of loans originated with a 3 percent down payment under

certain qualification guidelines that is intended to increase credit availability to first-time buyersmeeting eligibility standards.12In the case of Freddie Mac, borrowers will be required toparticipate in a borrower education program. In the case of Fannie Mae, borrowers will still haveto meet the standard eligibility underwriting requirements such as those relating to income,employment, and debt, and borrowers will be required to purchase private mortgage insurance.Borrowers making a low downpayment may still face higher costs for risk adjustment (calledloan level pricing adjustments) in the case of GSE-backed loans.13

11 Based on the REALTOR respondents most recent sales for the survey months, which altogether areviewed to be a representative sample of all sales for these months.12 http://www.fhfa.gov/Media/PublicAffairs/Pages/Statement-of-FHFA-Director-Melvin-L-Watt-on-Release-of-Guidelines-for-Purchase-of-Low-Down-Payment-Mortgages.aspx13 For FHA-insured loans, the upfront mortgage insurance premium is 1.75 percent of the base loan amout,and the annual premium is 1.35 percent for 30-year loans with LTV of 95 percent or more . For GSE-backed loans,the upfront loan level price adjustments is as low as 0.25 percent for borowers with FICO score of 740+ for 60%loan-to-value mortgages and as high as 3.5 percent for for borrowers with FICO score of less than 620 and 90-95%loan-to-value mortgages.

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FTHBuyer Investor Second

home

Relocation International Distressed

Sale

Percent of Sales Reported by REALTOR Respondents

That are All-Cash By Type of Buyer-- Nov 2014 RCI Survey


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International Transactions: 1.6 Percent of Residential Market

Approximately 1.6 percent of REALTOR respondents reported their last sale was apurchase by a foreigner not residing in the U.S. International buyers frequently pay cash as wellas purchase properties above the median price of the domestic buyer. For the 12 months endingMarch 2014, NAR estimated that sales to non-resident international clients and foreigners whoare temporarily residing in the U.S. amounted to $ 92.2 billion, as reported in the 2014 Profile ofInternational Homebuying Activity.14

14http://www.realtor.org/topics/profile-of-international-home-buying-activity

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Percent of First-time Buyers Obtaining a Mortgage Who

Had a Down Payment of 0% to 6% -- as of Nov 2014 *

Based on past three NAR -RCI surveys. NAR's RCI survey asks characteristics about the

REALTOR's last sale for the month.

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Sales to International Clients as Percent of Market*--as of Nov 2014 RCI Survey

*Based on most recent sale of the month of REALTOR res ondents.


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III. Current Issues

Credit Conditions Slowly Easing

Credit conditions are slowly easing, although credit continued to flow to those with high

credit scores. Almost half of REALTORS providing transaction credit score informationreported FICO credit scores of 740 and above; in 2013, the share was hovering at about 60percent. About 2 percent of REALTORS reported a purchase by a buyer with credit score of lessthan 620; in a normal market the share of credit scores below 620 would be closer to 5 percent.

Recently, Fair Isaac Corporation introduced a new scoring model (FICO 9) that givesless weight to unpaid medical bills and missed payments that have been paid off. FICOestimates that the new scoring model can boost credit scores of first-time homebuyers by about25 points and minorities by about 100 points. It has been reported that Fannie Mae and FreddieMac still use the old credit score model. A NAR survey showed that small banks who put theloans on their own portfolio instead of selling the loans to the GSEs are more amenable to usingthe new credit score model15. Credit limitations could loosen to the extent that home buyersmake greater use of mortgage origination by community banks and credit unions.

Reasons For Not Closing A Sale in November 2014

The difficulty of obtaining credit and the lack of affordable homes were frequentlycited as major challenges to home buying by REALTORS responding to the November 2014survey. About 15 percent reported having clients who could not obtain financing. Meanwhile,about 21 percent of REALTORS who did not close a sale reported that the buyer and seller

15 Ken Fears, New Credit Models Could Help, Someday.

http://economistsoutlook.blogs.realtor.org/2014/10/09/new-credit-models-could-help-someday/

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Distribution of FICO Scores Reported by REALTOR

Respondents --as of Nov 2014 RCI Survey

< 620 620-740 740+

Source: NAR RCI Surveys
http://economistsoutlook.blogs.realtor.org/2014/10/09/new-credit-models-could-help-someday/http://economistsoutlook.blogs.realtor.org/2014/10/09/new-credit-models-could-help-someday/http://economistsoutlook.blogs.realtor.org/2014/10/09/new-credit-models-could-help-someday/


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could not agree on the price or that the buyer lost the bidding competition. Appraisal issues werereported as accounting for 2 percent of failures to close a sale. Other reasons includeresponses that the buyer is still searching or that the transaction is in the escrow period or aclosing is underway. REALTORS have reported that under tighter underwriting guidelines, thedocumentation requirements for obtaining a mortgage have become very stringent and the

procedure more protracted.

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IV. Commentaries by NAR ResearchLatest Industrial Production

Lawrence Yun, Chief Economist

o Factory production in America grew solidly in the past month. This implies that the U.S.economy is brushing aside the weakening European economy and is in no danger of arecession. Job gains will continue. Commercial REALTORS specializing in industrialspaces will likely experience increased business opportunity.

o Specifically, industrial production in November was 5.2 percent higher from one year

ago. That is the best gain since January 2011.o The construction industry has been one of the lagging sectors in the current economic

cycle. Therefore, there has been lower production for construction supplies, likecranes. Meanwhile, the manufacturing sector is reviving very nicely.

16 Originators have become very stringent at verifying documentation requirements because of the risk thatthe GSEs will require them to repurchase the loan if the representation and warranties in the loan documents arefound to have been violated. The period within which the originator may be asked to repurchase the loan if the repsand warrants are not met is three years.

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Some Reasons Cited by REALTOR Respondents for Not

Closing A Sale -- As of Nov 2014Financing issues Appraisal Issues

Price/Competition Other

Other reasons include responses like waiting to close contract, no buyer or seller, or

buyer still looking .


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o Because of rising industrial production, the capacity utilization rate finally rose above 80percent for the first time since early 2008. High utilization will require constructing newfactories. Commercial real estate practitioners involved in factory site locations need to keeptheir eyes sharp.

o It is very good news that U.S. companies are producing more. However, it will still be the

case that many developing countries will take up a larger share of global manufacturing inthe future, particularly related to unskilled repetitive factory assembly work. With wagesrising in China, new factory centers could arise in Vietnam, the Philippines, andMexico. Americans working in menial repetitive tasks that do not require much educationwill therefore face low-wage competition from these countries. However, Americans in theknowledge-based work like software development, medical instruments, and professionalbusiness service will experience rising global demand for their services and will experiencehigher salaries over time. Income inequality in America will therefore likely become evenmore unequal in the future between those with and without an education.
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Lenders Tighten Modestly In 2014 Q3

Ken Fears, Director, Regional Economics and Housing Finance Policy

In the 3rdquarter as in earlier surveys, respondents to NARs Survey of MortgageOriginators were asked about impacts of the Qualified Mortgage rule on the mortgage lendingmarket. However, this quarter the survey expanded to measure lender expectations of marketconditions and capacity as well as current policy issues including changes at the Rural HousingService and lending headwinds.

Respondents indicated a production-weighted share of 5.0% for non-QM loans in the3rdquarter, nearly double the 2.6% share from the 2ndquarter. However, the rebuttablepresumption share fell sharply from 12.8% to just 3.5%. Interest rates fell to their lowest levelsin nearly 12 months by the end of the 3rdquarter. Interest rate changes have a larger impact onthe higher-priced portion of the market which also prefers interest-only (non-QM) products.

Additional Highlights of the Surveyo The non-QM share of originations nearly double in the 3rdquarter to 2.6%. However, the

rebuttable presumption share tumbled from 12.8% to 3.5% over this same time frame.

o

Respondents confidence in their preparations for the QM/ATR rules eroded again in the3rdquarter, with just 58.3% indicating that they had fully adapted compared to 61.9% in the2ndquarter.

o The net share of lenders offering rebuttable presumption and non-QM products increasedfrom the 2ndto the 3rdquarter. Willingness to originate non-QM mortgages fell dramaticallyfrom the 2ndquarter, but the decline was less dramatic for rebuttable presumptionmortgages. Lenders were more willing to originate prime mortgages with the exception ofthose with lower FICOs.
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o 24% of lenders felt the investor takeout for non-QM loans had improved from the 2ndquarter.

o The QM rule continues to dog lenders with 64% indicating having had an issue closing aloan in the 3rdquarter due to some facet of the rule, and an increase in the share of lendersusing buffers in advance of the QM requirements.

o Over the next 6 months, respondents expect improvements in demand for all products, but

more so for non-QM and rebuttable presumption loans. The majority of respondents expectimproved investor demand for all mortgage types, but some expect softening.o Slightly more respondents indicated fewer pre-approvals in the 3

rdquarter compared to ayear earlier, but half indicated having more than normal level or preapproved borrowers whocould not find a property.

o Respondents indicated a median forecast for mortgage rates to rise to 4.5% over the next sixmonths.

o 66.6% indicated that the increase in fees at the RHS would have an impact on RHS lendingin their area

o Overlays were the largest headwind to the market followed by documentation and DTI,suggesting that the QM rule is having an impact

o

Finally, 87.5% of respondents indicated that repurchase requests were a concern.

Identifying Areas Attractive to Baby Boomers

Nadia Evangelou, Research Economist

Metro areas with a lower cost of living and sunnier weather are poised to see an increasednumber of Baby Boomers moving in and buying a home as some delay retirement and remainparticipants on the labor market. NAR analyzed current population trends, housing affordability,cost of living, housing inventory and job market conditions in the100 largest metropolitan

statistical areasacross the U.S. to determine housing markets most likely to see a boost in salesfrom Baby Boomers.State taxes and the share of expenditures for Public Welfare, Hospitals,Health, Police Protection, Parks and Recreation at the state level for those areas were alsoconsidered. Thetop marketspositioned to see an influx of baby boomer homebuyers are asfollows:

- Albuquerque, New Mexico- Boise, Idaho- Denver- Fort Myers, Florida- Greenville, South Carolina- Orlando, Florida

- Phoenix- Raleigh, North Carolina- Sarasota, Florida- Tucson, Arizona

These metro areas are attractive to baby boomers because of their housing affordability, lower

tax rates and welcoming business environment, says Yun. With baby boomers working later in
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life, these factors will likely play as much of a deciding role of where boomers eventually retireas will areas with a warm climate or variety of outdoor activities.

According to a NAR generational study of homebuyers and sellersreleased earlier this year,baby boomers represented 30 percent of all buyers, had a median household income of $92,400

and bought a home that cost $210,000

4

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NAR also recently analyzed current housing conditions, job creation and population trends todetermine thebest markets for aspiring, leading edge millennial homebuyers.Visitwww.realtor.org/millennials to find out more about millennials and homebuying.
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2014 11 realtors confidence index 2014-12-22

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