march 2012 rci report

8/2/2019 March 2012 RCI Report

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Realtors Confidence Index ReportMarch 2012 Edition

Based on Data Collected Week Ending April 2, 2012

National Association of Realtors

Research Department


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SUMMARY Highlights

Jed Smith, Managing Director, Quantitative Research ([email protected]) George Ratiu, Manager, Quantitative and Commercial Research ([email protected]) .

Realtor comments and replies this month continued to indicate recovery in theresidential markets. All real estate is local, so comments were varied and many times diverse andcontradictory depending on location. All of the problems noted in previous months continue.For example,

Obtaining a mortgage is reported as difficult. Bargain hunters and low-price bids continue. Pricing continues to be a challenge. The appraisal process continues to be a problem.

However , fewer respondents noted major problems than had previously been the case, and agrowing number of respondents in recent months have been indicating cases of multiple bidding,low inventories, a resurgence of buyer interest, and the rapid resolution of distressed propertysales.

The health of the real estate market appears to be a function of location of the respondent,with some markets starting to trend upwards. It would be nice to conclude that the countrysresidential real estate problems are over; however, the data only substantiate that a significantnumber of Realtors reported improving market conditions. The real estate markets are drivenby jobs and the economy and there the reports have been mixed. There has been relativelygood job growth in recent months, but not enough to restore the economy to acceptableunemployment levels. We are still looking at possibly three to four years before unemploymentreaches reasonable levels if job creation continues at its current pace. In addition, there are a

variety of major uncertainties impacting the economy jobs, gasoline prices, unemployment,budget deficits, and a variety of other potentially negative situations. We continue to have aweak recovery.

What Does This Mean For Realtors?

This months RCI shows a market starting to turn with continued recovery. Confidenceand price expectations are up, rising rental rates have favorable implications for the residentialmarket, and time on market continues to decrease. Prices and interest rates continue to beattractive. Given that the typical homeowner will occupy a house for approximately 8 years andthat home ownership is basically a lifestyle decision, one can make a very good case that this is agood time to buy a house, remembering that staying within a reasonable budget and acceptablemortgage is important.
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Realtor Confidence: Up in Single Family, Townhouses, and Condos

The REALTORS Confidence Index is an indicator of housing market strength based on amonthly survey sent to over 50,000 real estate practitioners. Respondents indicate whetherconditions are, or are expected to be "strong" (100 points), "moderate" (50 points), and "weak" (0points). The results are the average score for each question. A score of 50 is the threshold

between a "strong" and a "weak" condition. The current months report is based on 4,490Realtor responses.

Realtor confidence in the market outlook has increased in terms of current marketperformance and in terms of market outlook for single family, townhouse, and condo markets.


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Townhouse Properties: Confidence Increasing

Condos: Increased Confidence


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78 Percent of Responding Realtors Expect Constant or Higher Residential Prices in theNext Year, up from 73 Percent Last Month

Buyer and Seller Traffic Strength Continues to Increase


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Time That Homes Are On the Market

As of March 2012, 28 percent of properties had been on the market for six monthsor more when sold. In contrast, 48 percent had been on the market for three months orless.


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March Distressed Sales: At 29 Percent of Market

Distressed sales go through several stages the initial overdue status for mortgage payments,the actual foreclosure by the financial institution, and the final sale of the property, frequently byRealtors through the MLS.

Measured at the MLS sales level, distressed sales have hovered in the 30 to 35 percent rangefor a number of years, with heavy sales concentrations in a few states.

Distressed sales are currently 29 percent of total sales.

What Does This Mean For Realtors: The Existing Home Sales market is bifurcated, withdistressed properties frequently being sold at significant discounts to market, frequently insubpar condition when going to market, and reported to be popular with investors seekingbargain prices. Currently Realtors in a number of markets are reporting shortages of inventories of distressed real estate: the markets are clearing distressed properties from themarket at a rapid rate.


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Distressed Real Estate Below Market Prices

Distressed properties sell below the market price of comparable, non-distressedproperties; the discount level fluctuates depending on sales location and types of properties.

Foreclosures have been selling at approximately 20 percent below market: 18.8 percent asof March 2012.

Short Sales have been selling at approximately 15 percent below market: 15.8 percent as of March 2012.


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Property Condition Affects Selling Price

The discount to market is affected by property condition. Well maintained propertiestend to sell at a lower discount than is the case for properties in poor condition. The un-weightedaverage price discounts to market are presented for April 2011 through March 2012.


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Cash Sales: 31 Percent of Residential Sales in February

The high preponderance of all-cash sales appears to be due to a number of factors:unrealistically high loan underwriting standards, a significant level of investor participation inthe market, and sales of properties as second homes.

First Time Buyers: 33 Percent of Total Buyers in March 2012.

Normally first time buyers are in the neighborhood of 40 percent of total residential sales,according to NARs Profile of Home Buyers and Sellers. Realtors have reported that investorsoffering all cash-sales to sellers have crowded out first-time buyers in some cases. Unsuccessful

first-time buyers typically continue their property search, sometimes making a number of bidsbefore securing a property.


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Buyer Relocation Job Changes

Realtors report that 12 percent of residential sales were to buyers for relocationpurposes i.e., a job move, retirement, etc. The percentage decrease in February is probably dueto seasonal issues.

Residential Sales to Investors: Currently 21 Percent of Residential Market

Investors accounted for 21 percent of total residential sales in March, down from 23percent in February. Investors have reported that in many cases they can obtain a positive cashflow converting properties to rental units, or obtain a resale after making improvements.Realtors have been reporting that the market is able to absorb the large number of distressedproperties coming onto the market. In some regions Realtors report that the market would

clear additional properties if available.


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Second Home Purchases At 11 Percent of Residential Market in March

Mortgage Down Payments

Down payments greater than or equal to 20 percent were made by 34 percent of residential home purchasers. Down payments of 11-19 percent were reported by 5 percent.


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Realtors Continue to Report Rising Rents for Residential Properties

Higher residential rents in March compared to a year ago were reported by 53 percent of Realtors, up from 46 percent a year ago. Lower rents were reported by 11 percent of Realtors, down from 18 percent a year ago.

Appraisals A Continuing Problem

Realtor comments indicate that appraisal and lending issues are the two major marketproblems in completing a sale. Of particular concern are the use of inexperienced/out-of-townappraisers and the use of distressed properties as comps in the case of non-distressed sales.

Thirty one percent of Realtors reported having had a problem with an appraisal in thepast 3 months. This does not mean that 31 percent of contracts had appraisal problems; rather 31percent of Realtors had one or more problems with an appraisal in the past 3 months.


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International Transactions Continue at Two Percent of Market

Sales of U.S. residential real estate to foreigners not residing in the U.S. continue to be inthe 2 percent range. Other NAR surveys have indicated that an additional 2 to 3 percent of residential sales are made to international customers residing in the U.S. Additional informationon international activities is available at http://www.realtor.org/research/research/reportsintl.
http://www.realtor.org/research/research/reportsintlhttp://www.realtor.org/research/research/reportsintl


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FICO Scores and Mortgages

A number of Realtors responding to the March Survey indicated continuedexceptionally tight credit conditions. A comparison of FICO scores for loan transactions asreported by Realtors responding to the RCI over the February and March time span comparedwith FICO scores reported by Fannie Maes Acquisition Profile by Key Product Features showing lending conditions in the pre-boom normal housing markets of a few years ago-- showsthat credit availability to lower scoring applicants appears to have declined. Realtors providedFICO information based on their understanding of the buyers credit situations; in many casesthe information was estimated. Overall the data seem to substantiate relatively tight creditconditions.

Credit Scores in Current Markets (Variety of Buyers and Lenders)vs. Fannie Mae Credit Mix of 2001-04.


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Housing Recovery Helps Retail Sales

On April 5, 2012, in Economist Commentaries , by Lawrence Yun, Chief Economist Share |

The recovering housing market is showing some impact in the retail sector. Furniture stores arereporting an 11 percent increase in sales recently from a low point two years ago. A stronger 22percent in gains are occurring at building supply and gardening stores.

In addition to the visible impact to retail sales in stores directly related to housing, there isalways a further multiplier effect even in areas such as restaurant spending and electronics aspeople earn more income from improved home sales.
http://economistsoutlook.blogs.realtor.org/2012/04/05/housing-recovery-helps-retail-sales/http://economistsoutlook.blogs.realtor.org/2012/04/05/housing-recovery-helps-retail-sales/http://economistsoutlook.blogs.realtor.org/category/economist-commentaries/http://economistsoutlook.blogs.realtor.org/category/economist-commentaries/http://economistsoutlook.blogs.realtor.org/category/economist-commentaries/http://addthis.com/bookmark.php?v=250&username=xa-4d2b47597ad291fbhttp://addthis.com/bookmark.php?v=250&username=xa-4d2b47597ad291fbhttp://economistsoutlook.blogs.realtor.org/files/2012/04/040512b.pnghttp://addthis.com/bookmark.php?v=250&username=xa-4d2b47597ad291fbhttp://economistsoutlook.blogs.realtor.org/category/economist-commentaries/http://economistsoutlook.blogs.realtor.org/2012/04/05/housing-recovery-helps-retail-sales/


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The housing component to the broader economy (GDP) in the past years has not been pretty. Thedeclines in new home construction and existing home sales cut into GDP. From 2006 to 2009,GDP was cut by about 1 percentage point. That is, had the housing market not suffered thedownturn and had been simply neutral, GDP growth would have been a full one percentage pointhigher. (There is a big difference between 3% GDP growth versus 4% GDP growth, forexample.)
http://economistsoutlook.blogs.realtor.org/files/2012/04/040512a.jpghttp://economistsoutlook.blogs.realtor.org/files/2012/04/040512c.png


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Percentage Point Impact to GDP from the Housing Sector

Now, with housing showing some recovery, though at a moderate pace, the contribution to theGDP will be positive both this year and next. A housing market recovery will result of anapproximate 0.7 percentage point growth in GDP. Thats good news for people working in the

industry, for retail shops, and for the broader economy.

march 2012 rci report

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