february 2015 realtors® confidence index

8/21/2019 February 2015 REALTORS® Confidence Index

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REALTORS® CONFIDENCE INDEXReport on the February 2015 Survey

NATIONAL ASSOCIATION OF REALTORS®

Research Department

Lawrence Yun, Senior Vice President and Chief Economist


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The REALTORS® Confidence Index ( RCI ) Report provides monthly information aboutreal estate market conditions and expectations, buyer/seller traffic, price trends, buyer profiles,and issues affecting real estate based on a monthly survey of REALTORS®. The February 2015report is based on the responses of 3,735 REALTORS® about local market conditions in

February. Of these, 2,077 respondents closed a sale and provided information about thecharacteristics of their last transaction in February. The data on a combined basis, are viewed to be representative of the sales for the month1. Responses were received from March 2-9, 2015.All real estate is local: conditions in specific markets may vary from the overall national trends presented in this report. REALTORS® may be interested in comparing their markets against thenational summary.

The Report also contains commentaries by the Research Department on recent economicdata releases and policies affecting housing. This week’s commentaries look at the impact of thestrengthening of the dollar on housing (Dr. Lawrence Yun), lenders’ response to recentregulatory changes to improve credit availability (Ken Fears), and the rebound in building permit

activity by metro areas (Nadia Evangelou).

Lawrence Yun, Senior Vice President and Chief Economist

Jed Smith, Managing Director, Quantitative Research

Gay Cororaton, Research Economist

Meredith Dunn, Research Communications Representative

1 The survey was sent to 50,000 REALTORS® who were selected through simple random sampling. Toincrease the response rate, the survey is also sent to respondents in the previous three surveys and who providedtheir email addresses. The number of responses to a specific question varies because the question is not applicableto the respondent or because of non-response. To encourage survey participation, eight REALTORS® are selectedthrough simple random sampling drawing to receive a gift card.


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Table of Contents

Summary .................................................................................................................................................... 1

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

Market Activity Improved in Most Markets in February 2015................................................................. 2

REALTORS’® Confidence About the 6-Month Outlook Improved ........................................................ 3

Buyer Traffic Continued to Outpace Seller Traffic in February 2015 ...................................................... 6

REALTORS Reported Stronger Home Price Growth in February 2015 .................................................. 8

REALTORS® Expect Prices to Increase Modestly in the Next 12 Months ............................................. 9

Properties Stayed for Shorter Days on the Market at 62 Days in February 2015 .................................. 10

II. Buyer and Seller Characteristics ......................................................................................................... 12

Sales to First Time Buyers: 29 Percent of Sales .................................................................................... 12

Sales for Investment Purposes: 14 Percent of Sales ............................................................................... 14

Distressed Sales: 11 Percent of Sales ...................................................................................................... 15

Cash Sales: 26 Percent of Sales ............................................................................................................ 16

First time Home Buyers Who Put Down “Low” DownPayment: 66 Percent ......................................... 17

International Transactions: 1.7 Percent of Residential Market ............................................................. 18

III. Current Issues .................................................................................................................................... 19

Credit Conditions Slowly Easing ........................................................................................................... 19

IV. Commentaries by NAR Research ...................................................................................................... 21

Strong Dollar and Housing Costs............................................................................................................ 21

Lenders Optimistic on Changes .............................................................................................................. 23

Rebounding Building Permit Activity By Metro Area ............................................................................ 25


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Summary

The information provided by REALTORS® in February 2015 indicated an improvementin most local markets compared to conditions in January 2015. The REALTOR® Confidence Index-Current Conditions, the REALTOR® Confidence Index-Six-Month Outlook, and the BuyerTraffic Index increased, indicating an overall improvement in sales despite harsher winter

weather in the Midwest, South, and Northeast regions. More REALTORS® reported rising prices and shorter days properties were on the market.

REALTORS® continued to report tight inventories, especially for affordable and in goodcondition properties. Qualifying for a mortgage remained generally difficult under tightqualification standards used by financial institutions. The reduction in FHA mortgageinsurance premiums was reported to be increasing home affordability for potential homebuyers.

REALTORS® were optimistic about the outlook for the next six months , possibly dueto the improving job market and the efforts to ease access to and lower the cost of credit.However, they noted several issues of concern:

o

extremely low inventory in many markets especially for affordable homes that are alsomove-in ready, leading to rising prices and multibidding (most states)

o buyers still have a hard time qualifying for a mortgage, although credit tightness is easing(e.g., TX,WI, CA, WI)

o appraisal issues relating to valuation and delays, especially in states where prices arerising strongly ( e.g., CA, TX, WA), and for VA loans and Fannie Mae-backed loans;

o home inspection and repair issues are causing delays and terminations, and cost of homeinsurance is increasing for older homes (SC,MO,CT);

o adverse impact of low oil prices in states with oil/gas production (TX, CO, OK, WY)o impact of the TILA/RESPA that will take effect August 2015 as the market participants

adjusts to the disclosure/loan processing timeline requirements (TX, OK, PA, NJ, MN)

o

increase in flood insurance (e.g. MA, FL, NY)o Slowing demand from international buyers (e.g., Canadians) due to strong US dollar (FL,

CA)o Negative effect of impending increase in mortgage rates

February 2015 REALTORS® Confidence Index Survey Highlights

Feb 2015 Jan 2015 Feb 2014

RCI –Current Conditions: Single Family Sales /1 63 58 60

RCI- 6 Month Outlook: Single Family Sales /1 75 72 68

RCI –Buyer Traffic Index /1 61 56 59

RCI-Seller Traffic Index /1 41 41 41

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

Sales to Investors, as Percent of Sales (%) 14 17 21

Cash Sales, as Percent of Sales (%) 26 27 35

Distressed Sales, as Percent of Sales (%) 11 11 16

Median Days on Market 62 69 62

Median Expected price growth in next 12 months (%) 3.4 3.2 3.9

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


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I. Market Conditions

Market Activity Improved in Most Markets in February 2015

Despite the heavy winter snow that hit the Midwest, North, and South regions, the REALTORS® Confidence Index-Current Conditions increased for all property types in

February 2015 compared to January 2014 and a year ago. The index for single-family homes was63 (58 in January 2015; 60 in February 2014). The indexes for townhomes and condominiumsalso improved although they are still below 50. REALTORS® reported that FHA’s and theGSE’s (Fannie Mae and Freddie Mac) financing eligibility regulations continued to makecondominium financing difficult to obtain2. An index above 50 indicates that the number ofrespondents who viewed their markets as “strong” outnumbered those who viewed them as“weak.”

3

REALTORS® reported that the reduction in the FHA monthly mortgage insurance premium and the introduction of the 3% downpayment conventional mortgages appear to behelping the market.There are reports that the credit tightness is starting to ease.

2 These regulations pertain to ownership occupancy requrements, delinquent dues, project approval process,and use for commercial space. Read the Statement of NAR Sumbitted for the Record to the Senate CommitteeHousing and Banking Affairs on December 9, 2015 athtttp://www.ksefocus.com/billdatabase/clientfiles/172/1/2180.pdf3 An index of 50 delineates “moderate” conditions and indicates a balance of respondents having“weak”(index=0) and “strong” (index=100) expectations or all respondents having moderate (=50) ex pectations.The index is not adjusted for seasonality effects.

63

44

40

0

20

40

60

80

2 0 0 8 0 1

2 0 0 8 0 5

2 0 0 8 0 9

2 0 0 9 0 1

2 0 0 9 0 5

2 0 0 9 0 9

2 0 1 0 0 1

2 0 1 0 0 5

2 0 1 0 0 9

2 0 1 1 0 1

2 0 1 1 0 5

2 0 1 1 0 9

2 0 1 2 0 1

2 0 1 2 0 5

2 0 1 2 0 9

2 0 1 3 0 1

2 0 1 3 0 5

2 0 1 3 0 9

2 0 1 4 0 1

2 0 1 4 0 5

2 0 1 4 0 9

2 0 1 5 0 1

REALTORS® Confidence Index - Current Conditions--

as of Feb 2015 RCI Survey

(50="Moderate" Conditions)

SF Townhouse Condo


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REALTORS’® Confidence About the 6-Month Outlook Improved

Confidence about the outlook for the next six months improved in February across all property types. In the single family market, the REALTORS® Confidence Index - Six-monthOutlook increased to 75 (72 in January 2015; 68 in February 2014). The index for townhomesrose to 55 (53 in January 2015; 50 in February 2014), while the index for condominiums hit the

50 mark (47 in January 2015; 46 in February 2014). An index greater than 50 indicates that thenumber of respondents who view the townhomes market as “strong” outnumber those who view

the market as “weak.”

The anticipated seasonal uptick in sales in the spring, the positive effect of low mortgagerates, and lower mortgage insurance premium payments underpinned the increased confidence.For loans originated starting January 26, 2015, FHA charges a monthly mortgage insurance premium of 0.85 percent on the outstanding loan balance, down from 1.35 percent. The GSEs(Fannie Mae and Freddie Mac) also increased the maximum loan to 97 of the house’s value, upfrom 95 percent, easing access to credit.

The following maps show the REALTOR® Confidence Index-Six-Month-Outlook bystate 4 as well as employment growth, a key driver of housing demand. For the first time, acrossall states, the index was greater than 50, which means that the number of respondents who have a“strong” outlook outnumbered those with “weak” outlook. Although there is increasing concernabout the negative effect of the decline in oil prices, the number of REALTORS® who expect a

“strong” mar ket in the next six months outnumber those who expect a “weak” market in NorthDakota, Colorado, and Texas. In Okalahoma, expectations in the single-family market were also broadly “strong”.

4 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.

75

55

50

0

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80

2 0 0 8 0 1

2 0 0 8 0 5

2 0 0 8 0 9

2 0 0 9 0 1

2 0 0 9 0 5

2 0 0 9 0 9

2 0 1 0 0 1

2 0 1 0 0 5

2 0 1 0 0 9

2 0 1 1 0 1

2 0 1 1 0 5

2 0 1 1 0 9

2 0 1 2 0 1

2 0 1 2 0 5

2 0 1 2 0 9

2 0 1 3 0 1

2 0 1 3 0 5

2 0 1 3 0 9

2 0 1 4 0 1

2 0 1 4 0 5

2 0 1 4 0 9

2 0 1 5 0 1

REALTORS® Confidence Index - Six Month Outlook--


(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 Dec 2014-Feb 2015 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 Dec 2014


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Buyer Traffic Continued to Outpace Seller Traffic in February 2015

REALTORS® reported a severe inventory shortage in most areas, especially for properties in the lower price range and for those that are move-in ready. The Seller Traffic Indexremained flat at 41, indicating “weak” supply in many markets ( same as in January 2015 and ayear ago) Although prices have been rising, many homeowners are still reluctant to list as they

wait for prices to pick up further to build up more equity. About 19 percent of mortgaged properties, mostly lower priced homes, have equity below 20 percent.5

Buyer traffic broadly increased in many local markets in February 2015 compared toJanuary 2015. The Buyer Traffic Index registered at 61 (56 in January 2015; 59 in February2014) , outpacing the Seller Traffic Index of 41. Respondents attributed the increasedhomebuying to the low mortgage rates and noted that the reduction in FHA mortgage insurance premiums and the introduction of the 3 percent downpayment loans were making homes moreaffordable for potential homebuyers.

The following maps show the buyer and seller traffic index by state . An index below 50indicates that more REALTOR® respondents viewed traffic conditions as “weak” compared tothose who viewed conditions as “strong.” Buyer traffic was broadly “strong” in most states,while the “weak” buyer traffic in the Northeast was likely due to the bad winter conditions.Buyer traffic was also broadly “strong” even in the states that are major producers of oil/gas suchas Texas, North Dakota, Oklahoma, and Louisiana. Meanwhile, the Seller Traffic Index

registered below 50 in all states, except Vermont. The supply of existing homes has been tight,and construction of new homes has been significantly below the normal pace of 1.5 million units.

5 Based on Corelogic’s Third Quarter 2014 Equity Report, 19 percent of mortgaged residential propertieshave less than 20 percent equity (under – equitied) and 10.3 percent are in negative equity. Home equity isconcentrated at the upper end of the market; about 94 percent of homes priced at $200,00 and above have positiveequity, while only 85 percent of homes priced at below $200,000 have positive equity.http://www.corelogic.com/research/negative-equity/corelogic-q3-2014-equity-report.pdf

61

41

20

30

40

50

60

70

80

2 0 0 8 0 1

2 0 0 8 0 5

2 0 0 8 0 9

2 0 0 9 0 1

2 0 0 9 0 5

2 0 0 9 0 9

2 0 1 0 0 1

2 0 1 0 0 5

2 0 1 0 0 9

2 0 1 1 0 1

2 0 1 1 0 5

2 0 1 1 0 9

2 0 1 2 0 1

2 0 1 2 0 5

2 0 1 2 0 9

2 0 1 3 0 1

2 0 1 3 0 5

2 0 1 3 0 9

2 0 1 4 0 1

2 0 1 4 0 5

2 0 1 4 0 9

2 0 1 5 0 1

REALTORS® Buyer and Seller Traffic Indexes--

as Feb 2015 RCI Survey

(50="Moderate" Conditions)

Buyer Traffic Index Seller Traffic Index


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REALTORS(c) Buyer Traffic Index


REALTORS(c) Seller Traffic Index



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NAR also tracks data on the number of properties shown by REALTORS® usingSentrilock, LLC data6. Based on this data, foot traffic eased for the second consecutive month inFebruary. Heavy snow falls, and tight supplies likely weighed against historically low mortgagerates and new affordable mortgage products. Despite the moderation, the trend suggests at leastas much strength as last spring. Showings need not necessarily translate to sales, but foot traffichas a strong correlation with future contracts and home sales.

REALTORS Reported Stronger Home Price Growth in February 2015

Amid tight inventory conditions, approximately 51 percent of REALTOR® respondentsreported that the price of their “average home transaction” was higher in January 2015compared to a year ago (47 percent in January 2015; 65 percent in February 2014). Tight supplyand the decline of availabilty of distressed properties appear to have had an upward pressure on prices. REALTORS® have reported about the lack of “affordable” and “good” conditionhomes. On the other hand, the increase in prices has put more homeowners in positive equity position, enabling current homeowners to use the equity gain as a downpayment or to pay cashfor a “move-up” or “move-down” purchase. Some REALTORS® have reported that first-timehomebuyers are losing out to those “move-u p” or “move-down” buyers.

6 For more information on this data, please contact Ken Fears at [email protected]. Every monthSentriLock, LLC. provides NAR Research with data on the number of properties shown by a REALTOR®.Lockboxes made by SentriLock, LLC. are used in roughly a third of home showings across the nation. Foot traffichas a strong correlation with future contracts and home sales, so it can be viewed as a peek ahead at sales trends twoto three months into the future. The index surged above the “50” mark which indicates that more than half of theroughly 200 markets in this panel had stronger foot traffic in December of 2014 than the same month a year earlier.This reading does not suggest how much of a change in traffic there was, just that more than half of the marketstracked experienced more foot traffic in December of 2014 than 12 months earlier.

mailto:[email protected]:[email protected]:[email protected]:[email protected]


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REALTORS® Expect Prices to Increase Modestly in the Next 12 Months

REALTORS® expected prices to increase modestly in the next 12 months, with themedian at about 3.4 percent, slightly up from 3.2 percent in January 2015. The map shows themedian expected price change in the next 12 months by the state of REALTOR® respondentsin the Dec 2014 – Feb 2015 surveys7. All real estate is local. State-level data is provided forREALTORS® who may want to compare local markets against the state trend.

States with the most upbeat price expectations (red) included the District of Columbia,

Florida, Nevada, and Colorado where prices are expected to increase at about 4 to 5 percent. Inmost of the West Coast region and South Atlantic states, prices are expected to increase 3-4 percent. REALTORS® expect more modest price growth along the Midwest region from North Dakota to Oklahoma, possibly on account of the concerns about the effect of falling oil prices. Prices in the Northeast , where demand is growing at a more modest pace compared toother regions, are expected to increase modestly within 2-3 percent.

7 In generating the median price expectation 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.

51%

11%

38%

0%

20%

40%

60%

80%

2 0 1 2 0 3

2 0 1 2 0 5

2 0 1 2 0 7

2 0 1 2 0 9

2 0 1 2 1 1

2 0 1 3 0 1

2 0 1 3 0 3

2 0 1 3 0 5

2 0 1 3 0 7

2 0 1 3 0 9

2 0 1 3 1 1

2 0 1 4 0 1

2 0 1 4 0 3

2 0 1 4 0 5

2 0 1 4 0 7

2 0 1 4 0 9

2 0 1 4 1 1

2 0 1 5 0 1

Percentage Distribution of Price Change from a Year

Ago Reported by REALTOR® Respondents --


Higher Lower Unchanged


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


Properties Stayed for Shorter Days on the Market at 62 Days in February 2015

With tight inventory supply, properties that closed in February were typically on the

market for a relatively short period of time at 62 days (69 days in January 2015; 62 days inFebruary 2014)8.

Short sales were on the market for the longest time at 120 days (128 days in January2015; 98 days in February 2014) . Foreclosed properties were on market at 58 days (63 days inJanuary 2015; 60 days in February 2014). Non-distressed properties were on the market at 61days (68 days in January 2015; 61 days in February 2014).

8 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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Approximately 34 percent of properties were on the market for less than a month whensold (30 percent in January 2015; 34 percent in February 2014).

By state, properties typically sold within 30 to 60 days in the West Coast states(California, Washington, Oregon), the Midwest states running from North Dakota to Texas,except for Kansas and Oklahoma , the Southern states of Florida, West Virginia, and Georgia,and in the District of Columbia and Massachusetts. All real estate is local. State-level data is provided for REALTORS® who may want to compare local markets against the state trend.

0

50

100

150

200

2 0 1 1 0 5

2 0 1 1 0 7

2 0 1 1 0 9

2 0 1 1 1 1

2 0 1 2 0 1

2 0 1 2 0 3

2 0 1 2 0 5

2 0 1 2 0 7

2 0 1 2 0 9

2 0 1 2 1 1

2 0 1 3 0 1

2 0 1 3 0 3

2 0 1 3 0 5

2 0 1 3 0 7

2 0 1 3 0 9

2 0 1 3 1 1

2 0 1 4 0 1

2 0 1 4 0 3

2 0 1 4 0 5

2 0 1 4 0 7

2 0 1 4 0 9

2 0 1 4 1 1

2 0 1 5 0 1

Median Days on Market of Sales Reported By REALTOR®

Respondents--as of Feb 2015 RCI Survey

All Foreclosed Short Sales Not distressed

Source: NAR, RCI Survey

All: 62 Foreclosed: 58 Shortsale: 120 Not distressed: 61

34%

15%13%

11%

6%4%

7%4% 5%

0%

5%

10%

15%

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30%

35%

40%

=12

mos

Distribution of Time on Market for Sales Reported by

REALTOR® Respondents -as of Feb 2015 RCI Survey

201402 201501 201502


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Median Days on Market for Sales Reported by REALTORS®, By State


II. Buyer and Seller Characteristics

Sales to First Time Buyers: 28 Percent of Sales

The share of first-time homebuyers decreased to 28 percent of existing home sales (29 percent in December 2014; 26 percent in January 2014 ) .9 REALTORS® reported extremelylow inventory levels especially for “affordable” and “good ” properties. With more homeownersnow in positive equity position, first-time homebuyers are also competing against “move-down” buyers paying cash. Interested homebuyers continue to find it challenging to obtain financingunder tougher and more cautious underwriting standards. REALTORS® reported that the 0.5 percentage point reduction in FHA monthly mortgage premium is helping to make homes moreaffordable for potential homeowners. NAR estimated that for a borrower with a $200,000mortgage, the borrower will save $83 monthly, nearly $1,000 after the first year, and $18,000

over 30 years.10

9 First time buyers accounted for about 33 percent of all homebuyers based on data from NAR’s 2014 Profile

of Home Buyers and Sellers(HBS). The HBS is a survey of primary residence homebuyers and does not captureinvestor purchases but does cover both existing and new home sales. The RCI Survey is a survey of REALTORS® about their transactions and captures purchases forinvestment purposes and second homes for existing homes.10 Ken Fears, “FHA Lowers Pricing to Reflect Less Risk”,http://economistsoutlook.blogs.realtor.org/2015/01/08/fha-lowers-pricing-to-reflect-less-risk/


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About 28 percent of all buyers were in the age group 34 and under, a group that hastypically included first-time homebuyers.

29%

0%

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50%

60%

2 0 0 8 1 0

2 0 0 9 0 2

2 0 0 9 0 6

2 0 0 9 1 0

2 0 1 0 0 2

2 0 1 0 0 6

2 0 1 0 1 0

2 0 1 1 0 2

2 0 1 1 0 6

2 0 1 1 1 0

2 0 1 2 0 2

2 0 1 2 0 6

2 0 1 2 1 0

2 0 1 3 0 2

2 0 1 3 0 6

2 0 1 3 1 0

2 0 1 4 0 2

2 0 1 4 0 6

2 0 1 4 1 0

2 0 1 5 0 2

First Time Buyers as Percent of Market*--


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

26% 25% 24% 28% 24% 29% 29% 28% 31% 26% 27% 28%

52% 49% 53% 46% 51% 47% 48% 47% 46% 50% 50% 50%

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

0%

20%

40%

60%

80%

100%

2 0 1 3 0 7

2 0 1 3 0 9

2 0 1 3 1 1

2 0 1 4 0 4

2 0 1 4 0 7

2 0 1 4 0 8

2 0 1 4 0 9

2 0 1 4 1 0

2 0 1 4 1 1

2 0 1 4 1 2

2 0 1 5 0 1

2 0 1 5 0 2

Age Distribution of Buyers for Sales Reported by REALTOR®

Respondents-- as of Feb 2015 RCI Survey

Age 34 and under Age 35-55 56+

Source: NAR, RCI Surveys


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About 38 percent of buyers were previously renters, a group that includes first-timehomebuyers.

Sales for Investment Purposes: 14 Percent of Sales

Approximately 14 percent of REALTORS® reported that their last sale was forinvestment purposes (17 percent in January 2015; 21 percent in February 2014). Purchases forinvestment purposes have been on the decline as fewer properties are foreclosed.

36% 38% 37% 38% 37% 38% 38%

55% 54% 54% 53% 54% 53% 53%

9% 9% 9% 9% 9% 9% 9%

0%

20%

40%

60%

80%

100%

201408 201409 201410 201411 201412 201501 201502

Living Status of Home Buyers at Time of Home Purchase

for Sales Reported by REALTOR® Respondents--

as of Feb 2015 RCI Survey*Lives with parents, relatives, or friends

Lives in own home

Rents an apartment or house

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

14%

0%

5%

10%

15%

20%

25%

30%

2 0 0 8 1 0

2 0 0 9 0 1

2 0 0 9 0 4

2 0 0 9 0 7

2 0 0 9 1 0

2 0 1 0 0 1

2 0 1 0 0 4

2 0 1 0 0 7

2 0 1 0 1 0

2 0 1 1 0 1

2 0 1 1 0 4

2 0 1 1 0 7

2 0 1 1 1 0

2 0 1 2 0 1

2 0 1 2 0 4

2 0 1 2 0 7

2 0 1 2 1 0

2 0 1 3 0 1

2 0 1 3 0 4

2 0 1 3 0 7

2 0 1 3 1 0

2 0 1 4 0 1

2 0 1 4 0 4

2 0 1 4 0 7

2 0 1 4 1 0

2 0 1 5 0 1

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: 11 Percent of Sales

With rising home values and fewer foreclosures, sales of distressed properties havegenerally been on the decline compared to the magnitude in the wake of the Great Recession. InFebruary 2015, distressed sales accounted for 11 percent of sales: 8 percent of reported sales

were foreclosed properties, and about 3 percent were short sales.

11

Fewer foreclosed propertieson the market explains to some degree why investment sales have generally been on the decline.

Foreclosed property sold at a 17 percent average discount, while properties sold as

short sales sold at an average of 15 percent discount. For the past 12 months, distressed properties in “above average” condition were discounted by an average of 9-11 percent, while properties in “below average” condition were discounted at an average of 14-20 percent.

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

0%

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50%

60%

2 0 0 8 1 0

2 0 0 9 0 2

2 0 0 9 0 6

2 0 0 9 1 0

2 0 1 0 0 2

2 0 1 0 0 6

2 0 1 0 1 0

2 0 1 1 0 2

2 0 1 1 0 6

2 0 1 1 1 0

2 0 1 2 0 2

2 0 1 2 0 6

2 0 1 2 1 0

2 0 1 3 0 2

2 0 1 3 0 6

2 0 1 3 1 0

2 0 1 4 0 2

2 0 1 4 0 6

2 0 1 4 1 0

2 0 1 5 0 2

Distressed Sales, As Percent of Sales Reported by

REALTOR® Respondents*-- as of Feb 2015 RCI Survey

Foreclosed Short Sale

Foreclosed: 8% Shortsale: 3%

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


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Cash Sales: 26 Percent of Sales

Approximately 26 percent of REALTOR® respondents reported that their lasttransaction was a cash sale (27 percent in January 2015; 35 percent in February 2014). Buyersof homes for investment purposes and second homes and foreign clients are more likely to pay

cash than first – time home buyers. Less than 10 percent of first-time homebuyers make an allcash purchase. Sales for investment purposes have been on the decline as prices have increasedand with fewer distressed sales coming in the market.

17

15

5

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25

30

2 0 0 9 0 2

2 0 0 9 0 5

2 0 0 9 0 8

2 0 0 9 1 1

2 0 1 0 0 2

2 0 1 0 0 5

2 0 1 0 0 8

2 0 1 0 1 1

2 0 1 1 0 2

2 0 1 1 0 5

2 0 1 1 0 8

2 0 1 1 1 1

2 0 1 2 0 2

2 0 1 2 0 5

2 0 1 2 0 8

2 0 1 2 1 1

2 0 1 3 0 2

2 0 1 3 0 5

2 0 1 3 0 8

2 0 1 3 1 1

2 0 1 4 0 2

2 0 1 4 0 5

2 0 1 4 0 8

2 0 1 4 1 1

2 0 1 5 0 2

Mean Percentage Price Discount of

Distressed Sales Reported by REALTOR® Respondents*

(in %)--as of Feb 2015 RCI Survey

Foreclosed Shortsale

%


1113

20

910

14

0

5

10

15

20

25

Above average Average Below average

Mean Percent Price Discount by Property Condition

of Distressed Sales Reported by REALTOR®

Respondents --Average for Mar 2014 - Feb 2015

Foreclosed Short sale


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

The majority of first-time homebuyers make a “low” downpayment. Among first-time buyers reported to be obtaining a mortgage in the months of December 2014 – February 2015,about 66 percent made a downpayment of 6 percent or less. 12 Although this is a decline fromthe 77 percent figure in early 2009, this is higher than the 61 percent figure at the beginning of2014, indicating some easing of credit.

12 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.

26%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2 0 0 8 1 0

2 0 0 9 0 2

2 0 0 9 0 6

2 0 0 9 1 0

2 0 1 0 0 2

2 0 1 0 0 6

2 0 1 0 1 0

2 0 1 1 0 2

2 0 1 1 0 6

2 0 1 1 1 0

2 0 1 2 0 2

2 0 1 2 0 6

2 0 1 2 1 0

2 0 1 3 0 2

2 0 1 3 0 6

2 0 1 3 1 0

2 0 1 4 0 2

2 0 1 4 0 6

2 0 1 4 1 0

2 0 1 5 0 2

Cash Sales as Percent of Market*--



9%

67%

52%

15%

76%

50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

FTHBuyer Investor Second

home

Relocation International Distressed

Sale

Percent of Sales Reported by REALTOR® Respondents

That are All-Cash By Type of Buyer-- Feb 2015 RCI Survey


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Page | 18

REALTORS® have reported that the reduction in FHA’s monthly mortgage insurance premium (from 1.35 percent to 0.85 percent) is likely to help interested homebuyers acquire ahome sooner. The GSEs also introduced the 3 percent downpayment loan early this year to easeacces to credit. However, a lower downpayment may not necessarily make a home mortgagemore affordable because of the effective increase in the mortgage rate. GSEs charge fees on theamount of the loan for risk factors such as low down payment (a.k.a loan level pricing

adjustments or LLPA)

13

. On top of the LLPA, borrowers obtaining low downpayment loans alsoneed to get and pay mortgage insurance.

International Transactions: 1.7 Percent of Residential Market

Approximately 1.7 percent of REALTOR® respondents reported their last sale was a purchase 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. There were reports that thestrengthening of the dollar against most currencies, including the Canadian dollar, has caused adecline in homebuying by Canadian clients.

13 For example, Fannie Mae charges 0.25 percent of the loan amount for borrowers with credit score of 740+to as high as 3.25 percent of the loan amount for those with credit scores of less than 620.13 (Ex: a borrowerobtaining a $200,000 mortgage gets charged $6,500 which is converted as an adjustment in the mortgage rate).

77%

66%

0.5

0.55

0.60.65

0.7

0.75

0.8

0.85

0.9

2 0 0 9 0 6

2 0 0 9 0 9

2 0 1 0 0 2

2 0 1 0 0 5

2 0 1 0 0 8

2 0 1 0 1 1

2 0 1 1 0 2

2 0 1 1 0 5

2 0 1 1 0 8

2 0 1 1 1 1

2 0 1 2 0 2

2 0 1 2 0 5

2 0 1 2 0 8

2 0 1 2 1 1

2 0 1 3 0 2

2 0 1 3 0 5

2 0 1 3 0 8

2 0 1 3 1 1

2 0 1 4 0 2

2 0 1 4 0 5

2 0 1 4 0 8

2 0 1 4 1 1

2 0 1 5 0 2

Percent of Reported First-time Buyers Obtaining a

Mortgage Who Had a Down Payment of 0% to 6%*--

as of Feb 2015

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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III. Current Issues

Credit Conditions Slowly Easing

Credit conditions are slowly easing, although credit continued to flow to thosewith high credit scores. About 52 percent of REALTORS® providing transaction credit scoreinformation reported FICO credit scores in the range of 620-740; in 2013, the share was hoveringat about 40 percent. About 2 percent of REALTORS® reported a purchase by a buyer withcredit score of less than 620, up from about 1-2 percent in 2012-2014. In a normal market, theshare of credit scores below 620 would be closer to 5 percent. Potential buyers facing creditlimitations might want to consider a mortgage origination by community banks and creditunions.

1.7%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2 0 1 0 0 3

2 0 1 0 0 5

2 0 1 0 0 7

2 0 1 0 0 9

2 0 1 0 1 1

2 0 1 1 0 1

2 0 1 1 0 3

2 0 1 1 0 5

2 0 1 1 0 7

2 0 1 1 0 9

2 0 1 1 1 1

2 0 1 2 0 1

2 0 1 2 0 3

2 0 1 2 0 5

2 0 1 2 0 7

2 0 1 2 0 9

2 0 1 2 1 1

2 0 1 3 0 1

2 0 1 3 0 3

2 0 1 3 0 5

2 0 1 3 0 7

2 0 1 3 0 9

2 0 1 3 1 1

2 0 1 4 0 1

2 0 1 4 0 3

2 0 1 4 0 5

2 0 1 4 0 7

2 0 1 4 0 9

2 0 1 4 1 1

2 0 1 5 0 1

Sales to International Clients as Percent of Market*--


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

2%

52%

45%

0%

10%20%

30%

40%

50%

60%

70%

2 0 1 2 0 2

2 0 1 2 0 4

2 0 1 2 0 6

2 0 1 2 0 8

2 0 1 2 1 0

2 0 1 2 1 2

2 0 1 3 0 2

2 0 1 3 0 4

2 0 1 3 0 6

2 0 1 3 0 8

2 0 1 3 1 0

2 0 1 3 1 2

2 0 1 4 0 2

2 0 1 4 0 4

2 0 1 4 0 6

2 0 1 4 0 8

2 0 1 4 1 0

2 0 1 4 1 2

2 0 1 5 0 2

Distribution of FICO Scores Reported by REALTOR®

Respondents --as of Jan 2015 RCI Survey

< 620 620-740 740+

Source: NAR RCI Surveys


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Problems Encountered in Closing a Sale

REALTORS® reported that for contracts that went into settlement or were terminatedduring the past 3 month period, the major problems encountered prior to contract settlement ortermination were issues related to obtaining financing, inspection, and appraisal14. Of the mostrecent contracts that went into settlement (on-time or delayed ) or were terminated during the

past 3 month period , 13 percent encountered issues relating to obtaining financing, 9 percent hadhome inspection issues, and 7 percent faced appraisal issues.

Looking at contracts that were terminated (which account for 7 percent of all contractssettled and terminated) , home inspection issues were the major problems. About 29 percent ofterminated contracts had home inspection issues, 25 percent had financing issues , and 8 percenthad appraisal issues.

14 Respondents were asked about the outcome of their most recent contract that went into settlement or wasterminated in the past three months. The 3-month period is deemed to provide a period of time for problems toevolve or cure during which time the contract will either go into settlement or be terminated. Contracts that remain pending will not be captured during this period of time.

54.9%

6.9%

13.3%

0.3%

3.7%

8.8%

4.1%

0.8%

3.4%

10.3%

no problems encountered

appraisal issues

issues related to obtaining financing

buyer lost job

issues in buy/sell distressed property

home inspection/environmental issues

titling/deed issues

home/hazard/flood insurance issues

contingencies stated in the contract

Other

Problems* Encountered for Contracts That Went Into Settlement

(On Time or Delayed) or Were Terminated in the Past 3 Months --

Feb 2015 RCI Survey

* Multiple responses allowed. Based on the most recent sales contract that closed or terminated in the

past 3 months , which are viewed to be a representative sample for closed or terminated contracts .

"Other" includes buyer or seller backing out, builder delays, financing/approval delays.


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IV. Commentaries by NAR Research

Strong Dollar and Housing Costs

Lawrence Yun, Chief Economist

o The Almighty Dollar is showing the world who is the boss. The dollar has strengthenedagainst nearly all other foreign currencies in the past year. The strong dollar is a reflection of better economic conditions and greater confidence in the U.S. versus the rest of theworld. The dollar now carries a bigger purchasing power. But the impact is not necessarily positive.

o Numerically, on average the U.S. dollar has strengthened by 11 percent in the past 12 monthsto February and even by more over the past few years. Against some currencies the gainshave been even more dramatic. The U.S. Dollar is up 25 percent compared to recent yearsagainst the Canadian counterpart; up 17 percent against the Euro; up 47 percent against the

Japanese Yen; and up by more than 100 percent against the Russian Ruble. In the simplestterm this gain means Americans traveling abroad will see bargains everywhere and will beextra proud of their home country. For Americans staying at home, many of the foreign-made products at Walmart, for example, will be cheaper.

o The strong dollar unfortunately will not translate into lower housing costs. Why? Landcannot be shipped across oceans and construction workers demand dollarcompensation. That is why rents are rising at 3.4 percent, essentially at a 7-year high, andhome prices are appreciating at more than 5 percent.

4%

8%24%

3%

7%

29%

5%

2%

6%

25%

no problems encountered

appraisal issuesissues related to obtaining financing

buyer lost job

issues in buy/sell distressed property

home inspection/environmental issues

titling/deed issues

home/hazard/flood insurance issues

contingencies stated in the contract

Other

Problems* Encountered for Contracts That Terminated in the

Past 3 Months --Feb 2015 RCI Survey

(Note: Terminated Contracts Represent 7 Percent of Sales Contracts

that Went into Settlement or Terminated in the Past 3 Months)

* Multiple responses allowed. Based on the most recent sales contract that terminated in the past 3

months , which are viewed to be a representative sample for terminated contracts . "Other" includes

buyer or seller backing out, builder delays, financing/approval delays.


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o One way the stronger dollar will help the real estate market is that the interest rates can staylow for longer. The Federal Reserve will raise interest rates sometime this year. The date ofinterest rate hike is likely being pushed further away because the strong dollar has tamedinflation (outside of housing costs). Even with the likely delay by the Fed on rate hike, themortgage rates will be on an upward path, reaching possible 4.5 to 4.7 percent by the end of

the year (though not likely over 5 percent as previously forecasted before the dollar gains).

o Today, the U.S. dollar is the unrivaled global reserve currency. Britain, about 100 years ago,had the global currency status where one British Pound could command $5. In the longdistant past, Venice held the global reserve currency and thereby its economyflourished. The importance of the global reserve currency was noted by Shakespeare in his play Merchant of Venice. It would have been very easy for a short-term gain to simplydefault on the loan rather than pay … with a pound of flesh. But the Venetians knew thatdefault on a contract meant that they would lose their global reserve currency status and endits economic prosperity. So there was to be no debasing or shaving of Venetian coins andthe rule of law and not rule of passion was to be the mainstay of Venetian society.

http://economistsoutlook.blogs.realtor.org/files/2015/03/30-year.pnghttp://economistsoutlook.blogs.realtor.org/files/2015/03/us-dollar.pnghttp://economistsoutlook.blogs.realtor.org/files/2015/03/imports.png


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Lenders Optimistic on ChangesKen Fears, Director, Regional Economics and Housing Finance Policy

In recent months, two changes were made to government financing that were intended toimprove credit availability. Mortgage lenders who took part in the 4th quarter Survey ofMortgage Originators agreed that both programs, the new 3% down payment loan at Fannie Mae

and Freddie Mac as well as the reduction of fees at the FHA, will provide a boost to the housingmarket.

In November, the FHFA which oversees Fannie Mae and Freddie Mac, announced that it wouldonce again allow the two entities to finance loans with as little as 3%. These loans would be forfirst-time buyers, require buyer education, require strong underwriting, and would be priced toreflect their risk. As discussed in an earlier blog, this 3% product would only be accessible by arelative slim portion of the market. A 71.4% majority of lenders who participated in the4th quarter survey felt that the 3% product will help to expand access to credit.

In early January, the FHA announced a reduction in the annual mortgage insurance premiumcharged from 1.35% to 0.85%. The vast majority of respondents indicated that this would boost production with a production-weighted average increase of 8.5%. 10% of respondents indicatedthat the change would simply shift demand from the GSEs to the FHA as lender overlays wouldlimit new entrants to the market. No respondents indicated that the fee reduction would not havean impact.

http://www.realtor.org/reports/february-2015-mortgage-originators-surveyhttp://www.realtor.org/reports/february-2015-mortgage-originators-surveyhttp://economistsoutlook.blogs.realtor.org/2014/11/12/fannie-and-freddie-to-back-3-down-loans-safely/http://economistsoutlook.blogs.realtor.org/files/2015/03/Nov-fha.pnghttp://economistsoutlook.blogs.realtor.org/2014/11/12/fannie-and-freddie-to-back-3-down-loans-safely/http://www.realtor.org/reports/february-2015-mortgage-originators-surveyhttp://www.realtor.org/reports/february-2015-mortgage-originators-survey


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NAR Research estimated that the pricing change would price in an additional 90,000 to 140,000

potential homeowners who cannot afford to purchase in the current market. The 8.5% increasethat lenders cited correlates to an increase in purchase volume of more than 300,000 purchasemortgages[1]. Overlays are a wild card in the current market that could hamper the impact of therate reduction, though the administration has made overtures to this end.

FHA and GSEs have made significant changes to improve credit availability in recentmonths. Lenders who took part in the 4th quarter survey indicate that these changes should helpto improve access and affordability to consumers. Overlays will remain a headwind, limiting thefull benefit of these changes, until the FHA and GSE can ameliorate lender concerns aboutcertain legal risks.

[1] The 8.5% change is assumed equal for purchase and refinance volume. This might not be thecase as the question asks for the impact on “total” volume suggesting that the unit impact on purchase volume could be smaller or larger.

http://economistsoutlook.blogs.realtor.org/2015/01/08/fha-lowers-pricing-to-reflect-less-risk/http://economistsoutlook.blogs.realtor.org/Users/bsnowden/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/0OE44GZC/SMO%204th%20Q%202014%20-%20Blog3.docx#_ftn1http://economistsoutlook.blogs.realtor.org/Users/bsnowden/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/0OE44GZC/SMO%204th%20Q%202014%20-%20Blog3.docx#_ftnref1http://economistsoutlook.blogs.realtor.org/files/2015/03/MIp.pnghttp://economistsoutlook.blogs.realtor.org/Users/bsnowden/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/0OE44GZC/SMO%204th%20Q%202014%20-%20Blog3.docx#_ftnref1http://economistsoutlook.blogs.realtor.org/Users/bsnowden/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/0OE44GZC/SMO%204th%20Q%202014%20-%20Blog3.docx#_ftn1http://economistsoutlook.blogs.realtor.org/2015/01/08/fha-lowers-pricing-to-reflect-less-risk/


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Rebounding Building Permit Activity By Metro Area Nadia Evangelou, Research Economist

Building permits have trended up during the past several months indicating that U.S. residentialconstruction will likely strengthen in 2015. Since building permits are an important leadingindicator for developments in the economy, it is worthwhile to take a closer look at the number

of building permits at the metropolitan level.

The visualization (http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building- permit-activity/) tracks the number of building permits issued in the 100 largest MetropolitanAreas for the following four periods:

2000 – 2003: Pre – Bubble period,2004 – 2006: Bubble period,2007 – 2011: Bust period,2012 – 2014: Recovery period.The first page of the visualization shows the annual growth of building permits for each of these periods. We see that:

2000 – 2003 (Pre – Bubble period): Eight out of ten metro areas had positive growth while Portland – South Portland, ME had thehighest annual growth (31.3%). In contrast, building permits decreased by 21.1% in Greensboro

– High Point, NC.2004 – 2006 (Bubble period): The number of metro areas with positive annual growth of building permits dropped to one outfour metro areas. Baton Rouge, LA showed the highest growth (32.3%) while Toledo, OH hadthe largest decline (-30.8%).

2007 – 2011 (Bust period): None of the 100 largest metro areas exhibited annual growth in this period while Modesto, CAwas the metro area with the largest decrease (-45.5%).

http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/


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2012 – 2014 (Recovery period): Three out of four metro areas had positive annual growth while Grand Rapids – Wyoming, MItook the lead with annual growth of 48%. However, Scranton – Wilkes – Barre – Hazleton, PAhad the largest decrease among the 100 largest metro areas (-39.3%).

The second page of the visualization (http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/) shows the change in the median number of building permits in each period compared with the

pre – bubble period (2000-2003). The data seek to answer the question: In which metro areas has building permit activity returned to the pre-bubble level? Comparing the median number of the building permits during the pre – bubble period and the following periods, we observe that:

Bridgeport – Stamford – Norwalk [1], CT, El Paso, TX, and Shreveport – Bossier City, LA had permit activity that exceeded the pre-bubble period in each of the following three periods. Forexample, in El Paso, TX the median number of building permits was higher by 15.8% in the bubble period, 16.2% in the bust period and 14.6% in the recovery period compared with the pre- bubble period. Thus, those areas continued to experience solid levels of building permit activitythroughout each phase of the cycle.

Austin – Round Rock – San Marcos, TX and Fayetteville – Springdale – Rogers, AR-MOrecovered from the effects of the bust period and the number of building permits exceeded pre- bubble levels during the recovery period.

However, Greensboro – High Point, NC, Denver – Aurora – Broomfield, CO and Grand- Rapids – Wyoming, MI were not able to return to the pre-bubble level of building permit activity. Forinstance, in Grand Rapids – Wyoming, MI the median number of building permits decreased by43.7% in the bubble period, by 87% in the bust period and by 78.5% in the recovery periodcompared with the pre-bubble level of building permit activity.
http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/Users/mdunn/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/IFZ34KGR/Blog_Building%20Permits.docx#_ftn1http://economistsoutlook.blogs.realtor.org/Users/mdunn/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/IFZ34KGR/Blog_Building%20Permits.docx#_ftn1http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/http://economistsoutlook.blogs.realtor.org/2015/02/03/rebounding-building-permit-activity/

february 2015 realtors® confidence index

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