realtors® confidence index february 2013 report

7/29/2019 Realtors Confidence Index February 2013 Report

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REALTORS CONFIDENCE INDEXReport and Market Outlook

February 2013 Edition

Based on Data Collected February 25 through March 1, 2013

NATIONAL ASSOCIATION OF REALTORS

Research Department

Lawrence Yun, Senior Vice President and Chief Economist


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Table of Contents

SUMMARY.................................................................................................................................................. 3

REALTOR Confidence in Current Market Conditions Continued to Increase ..................................... 3

Demand for Properties Continued to Expand Faster than Supply ........................................................... 4

REALTORS Are Increasingly Optimistic Concerning the Market Outlook......................................... 5

REALTORS generally expect to see improving prices for the next 12 months .................................... 6

NAR Forecasts Continued Sales and Price Increases as are indicated by REALTOR Responses ........ 6

I. Market Conditions .................................................................................................................................... 7

Confidence Is Up Across All Property Types ........................................................................................... 7

Prices Continue to Firm Up ...................................................................................................................... 8

Median Days on the Market: 74 Days .................................................................................................... 10

Distressed Sales: 25 Percent of Sales...................................................................................................... 11

II. Buyer and Seller Characteristics ............................................................................................................ 14

Cash Sales: 32 Percent of Residential Sales .......................................................................................... 14

First Time Buyers: 30 Percent of Residential Buyers............................................................................ 15

Residential Sales to Investors: 22 (Percent of Residential Market) ...................................................... 15

Second Home Buyers : 10 Percent of Residential Market ...................................................................... 16

Relocation Buyers : 13 Percent of Residential Market ........................................................................... 16

International Transactions: About Two Percent of Residential Market.................................................. 17

Mortgages With Down Payments of 20 Percent or More ....................................................................... 17

Rising Rents for Residential Properties .................................................................................................. 18

REALTORS Also Reported Commercial Rentals and Sales .............................................................. 19

III. Current Issues........................................................................................................................................ 20

Tight Credit Conditions and Slow Lending Process ............................................................................... 20

AppraisalsA Continuing Problem ....................................................................................................... 20

IV. Articles and Comments......................................................................................................................... 21

Personal Income Falls, But Rental Income Is Strong ............................................................................. 21

New Home Sales Positive ....................................................................................................................... 22

Comments From REALTORS ............................................................................................................. 23


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SUMMARYJed Smith and Gay Cororaton

TheREALTORS Confidence Index (RCI)Report provides monthly information

pertaining to expectations about overall market conditions, buyer/seller traffic, price, buyer

profiles, and issues affecting real estate. The current Report is based on responses of 3,627REALTORS to a survey conducted during February 25 through March 1, 20131. All real

estate is local: conditions in specific markets may vary from the overall national trendspresented in this report.

Confidence about current market conditions and in the outlook for the next six monthsrose in February. REALTORS generally reported strong buyer demand and improving prices

amid tight inventory and restrictive credit conditions. Despite the overall positive feedback,

REALTORS expressed concern over the weak job growth and the looming impact of the fiscal

cuts or the budget sequester.

REALTOR Confidence in Current Market Conditions Continued to Increase

1 The survey is sent to about 50,000 REALTORS.

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REALTORS Confidence Index - Current Conditions

Feb 2013

SF TH Condo

SF: 62 TH: 43 Condo 36


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Demand for Properties Continued to Expand Faster than Supply

The Buyer Traffic Index rose to 64 while the Seller Traffic Index stayed essentiallystagnant, registering at 39. In many areas, REALTORS reported low inventory levels of

homes for sale.

Tight inventory conditions have been cited as leading to higher prices and reduced time

on market. About 83 percent of REALTORS reported constant or increasing prices compared

to their average home transaction a year ago. Median days on the market was 74 days.

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Indexes of Buyer and Seller Traffic -- Feb 2013

Buyer Traffic Index Seller Traffic Index

Buyer: 64 Seller : 39

54%58%

62% 64% 64%69% 71%

73% 73%79% 83% 83%

Percentage of Respondents Reporting Constant or

Higher Prices Today Compared to a Year Ago


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REALTORS Are Increasingly Optimistic Concerning the Market Outlook

96 97 98 92101 96 98 99 99 97

9183

72 70 69 70 70 71 70 73 7174

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Median Days on the Market for All Sales

Source: NAR, RCI Survey

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REALTORS Confidence Index--Six-Month Outlook

Feb 2013

SF TH Condo

SF: 69 TH: 48 Condo: 43


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REALTORS generally expect to see improving prices for the next 12 months

NARForecasts Continued Sales and Price Increases as are indicated by REALTOR

Responses

What Does This Mean For REALTORS?

The real estate markets continue to recover both in terms of sales and price. Continued

restrictive mortgage availability with tight underwriting standards is a problem, butREALTORS report that loans are frequently available at smaller banks and credit unions.

Tight inventories are reported as making markets increasingly competitive.

0.000.501.001.502.002.503.003.504.004.50

REALTORS' Median Expected Price Change

for Next 12 Months (in %)

Source: NAR, RCI Survey

in %

Feb 2013: 3.9%

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Home Sales and Prices: Actual thru 2013 Forecast

EHS Sales EHS Median Prices

Sales Prices


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I. Market Conditions

Confidence Is Up Across All Property Types

The indexes for single family properties continued to improve in February . The Current

Conditions Confidence Index for single family homes rose to 62, while the Six-Month OutlookConfidence index was up at 69 (an index of 50 indicates moderate expectations).

The outlook index for townhouses is nearing the benchmark level of 50 which delineates

moderate expectations. The outlook index for condo properties continues to rise towards

moderate, with some comments indicating continued problems with FHA certification.

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REALTORS Confidence Index--Feb 2013

Current and Six Month Outlook: Single Family Properties

Current Conditions 6-Month Outlook

Current: 62 Outlook: 69

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Current and Six Month Outlook: Townhouse Properties




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Prices Continue to Firm Up

With strong buyer demand and tight inventory, most REALTORS reported rising prices

and expected prices to increase in the next 12 months.

o About 83 percent of respondents reported constant to rising prices compared to theiraverage transactions a year ago.

o About 16 percent reported a sales premium compared to the asking price.o About 92 percent expect prices to remain the same or to increase in the next 12 months.

Price expectations are most upbeat in the West region and the states of Texas, Florida,Michigan, and North Dakota.

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Current and Six Month Outlook: Condo Properties



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Percent Distribution of Respondents Reporting Average

Price Change Compared to a Year Ago

10% up

5 to 9% up

1 to 4% up

Unchanged

1 to 4% down

5 to 9% down

10%+ down

% Price Change

% of

respondents


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4.0%

3.7%3.4%

5.8%

11.3%

19.6%

20.2%

15.7%

7.8%

3.9%

2.5%

0.7%

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0.5%0.3%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

net discount of greater than 23%

net discount of 20-23%net discount of 16-19%

net discount of 12-15%



net discount of greater than 0 to 3 %

0% net discount or net premium

net premium of greater than 0 to 3%

net premium of 4-7%

net premium 8-11%

net premium 12-15%

net premium of 16-19%

net premium of 20-23%net premium of greater than 23%

Percent of REALTORS Reporting

Net discount or Net Premium Of the Listing Price- Feb 2013

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REALTORS Price Expectations for Next 12 Months

Feb 2013 RCI Survey

Constant/Rising Prices Falling Prices

92% expect constant/higher prices in next 12 months


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Median Expected Price Change in Next 12 Months

Based on information from November 2012 thru February 2013

Median Days on the Market: 74 Days

The median days on the market was 74 days in February (71 in January). Short saleshad the longest days on market with a median of 101 days (94 in January), while foreclosures

were on the market for 52 days (47 days inJanuary). The median days on the market for non-

distressed properties was 77 days (75 days in January).

About 33 percent of REALTORS noted that recently sold properties were on the market

for less than a month when sold compared to 24 percent in the same month last year. The

percentage of REALTORS reporting that the house sold had been on the market for 6 months

or more is down to 21 percent from 26 percent a year ago.


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Distressed Sales: 25 Percent of Sales

About 25 percent of reported sales were distressed properties, substantially down from levels

a few years ago. REALTORS reported strong demand for REOs from investors, whotypically pay cash. Cash sales accounted for roughly 49 percent of distressed sales (46 percent in

January 2013). Foreclosed property sold on the average at a 18 percent discount, while

shortsale properties sold at a 15 percent average discount.

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Median Days on Market

Short Sales Foreclosed Not distressed AllSource: NAR, RCI Survey

Feb 2013: Shortsale: 101; Foreclosed: 52; Not distressed: 77; All: 74

24%

13%11% 11%

7% 7%10%

6%

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33%

12%13%

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=12

mo

Time On Market When Sold-- Feb 2013

201202 201302


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0%

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Percent of Respondents Reporting

Distressed Sales

Foreclosed As % of Sales Short Sale As % of Sales

Feb 2013: Foreclosed: 15% Shortsale: 10%

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Mean Percentage Price Discount of

Distressed Sales (in %)

Foreclosed Shortsale

Feb 2013: Foreclosed: 18%; Shortsale: 15%

%


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14.3 16.2

21.2

29.0

34.7

12.7 13.016.4

21.2

28.8

0.0

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40.0

Above average Average Below average Well below

average

Bottom 1%

Percent Price Discount by Property Condition (%)

Unweighted Average for Mar 2012 to Feb 2013

Foreclosed Shortsale

%

15.3 10.9

14.7 14.220.1 16.6

28.5 20.3

11.0 26.5Bottom 1%

Below average

Well below ave

Above average

Average

Mean Percent Below Market Value

Feb 2013 RCI Survey

House Condition Foreclosure Short Sale


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II. Buyer and Seller Characteristics

Cash Sales: 32 Percent of Residential Sales

Approximately 32 percent of REALTORS who made a sale reported a cash sale in

February (28 percent in January). International homebuyers and investors typically pay cash.

0%

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Cash Sales as Percent of Market

Feb 2013: 32%

11%

73%

58%

21%

79%

49%

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FTHBuyer Investor Second_home Relocation International Distressed

Percent of Cash Sales by Type of Buyer- Feb 2013


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First Time Buyers: 30 Percent of Residential Buyers

Approximately 30 percent of responding REALTORS reported making a sale to first

time home buyers (same as in January). Normally, first time buyers are in the neighborhood of

40 percent.2

Approximately 11 percent of first-time buyer sales were cash sales.

Residential Sales to Investors: 22 (Percent of Residential Market)

Approximately 22 percent of respondents who reported a sale to an investor reported a

cash sale (19 percent in January).

2Based on data fromNARs Profile of Homebuyers and Sellers.

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First Time Buyers as Percent of Market

Feb 2013: 30%

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Sales to Investors as Percent of Market

Feb 2013: 22%


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Second Home Buyers : 10 Percent of Residential Market

Relocation Buyers : 13 Percent of Residential Market

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Second-Home Buyers as Percent of Market

Feb 2013: 10%

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Relocation Buyers as Percent of Market

Feb 2013: 13%


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International Transactions: About Two Percent of Residential Market

Approximately 1.6 percent of REALTORS reported sales of U.S. residential real estate

to foreigners not residing in the U.S. Cash sales were reported at 79 percent.

Mortgages With Down Payments of 20 Percent or More

Approximately 35 percent of sales with mortgages involved a down payment of 20

percent or more.

0.0%

0.5%

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Percent of Sales to International Clients

Feb 2013: 1.6%

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Percent of Sales by Downpayment Levels

11-19% >=20%

Feb 2013: At least 20% D/P: 35%


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Rising Rents for Residential Properties

Approximately 51 percent of responding REALTORS reported higher residential rents

compared to 12 months ago. Twenty-three percent of REALTORS reported conducting an

apartment rental.

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Percent of REALTORS Reporting Changing Rent Levels as

Compared to 12 Months Ago

Higher Rents Lower Rents Constant rents

Feb 2013: Rising rent: 51%

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Percent of Respondents Conducting

An Apartment Rental

Feb 2013: 23%


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REALTORS Also Reported Commercial Rentals and Sales

3%4%

3%4% 4%

4%

3%

4%

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5%

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Percent of Respondents Conducting

Commercial Rental

2.0%2.2%

1.7%

2.6%

3.0%

3.9%

2.3%

3.1%

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0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

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4.5%

201207 201208 201209 201210 201211 201212 201301 201302

Percent of Respondents With Commercial Sales


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III. Current Issues

Tight Credit Conditions and Slow Lending Process

REALTORS continued to express concern over unreasonably tight credit conditions.Mortgage lenders appear to continue to display an unnecessarily high level of risk aversion. In

the 2001-04 time frame approximately 40 percent of residential loans went to applicants withcredit scores above 740. Currently the percentage is in the 50 percent range. Estimates by NAR

economists have indicated that an additional 500,000 to 700,000 additional sales could be made

if credit conditions returned to normal.

The meaning for REALTORS is clear: In many cases lenders are not making loans to

potential buyers with less than perfect credit scores but who are well qualified to buy a home.

A potential home buyer who is rejected by one bank or financial institution should try, try, try

again at a different financial institution.

AppraisalsA Continuing Problem

Appraisals continued to be a problem in moving sales transactions to closure. ManyREALTORS continue to report that appraisal values are not keeping pace with the

appreciation in market values.

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FICO Scores: Recent Scores in 2013 vs. 2005

lt 620 740+ Fannie/Freddie 740+


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IV. Articles and Comments

Personal Income Falls, But Rental Income Is StrongLawrence Yun, Chief Economist

Personal income, measuring the income of everyone combined, fell in January by a sizablechunk. A decline of 3.6 percent over a single month is the largest fall in about 20 years.

The decline was due to a one-time factor of a massive dividend income drop in Januaryfollowing a massive dividend income increase in December. Many companies decided topayout very high dividends late last year so that their stockholders would pay taxes at a lower2012 tax rate.

Total wages and salary disbursement also fell, not necessarily congruent with job gains thatare occurring in the economy. It had declined 0.6 percent in the month, though is up 2.9percent from one year ago. The trend has been mostly positive over the past 3 years.

On the bright side, entrepreneurs are doing better and rent income is on a tear. Overallproprietors income rose 0.5 percent in January and is up 5.6 percent from one yearago. Note, this income is one of the most volatile components and depends heavily on

broader economic trends. Rent income continues a booming streak as rental households

have risen sizably in the past 6 years. Todays data on income, if we exclude the special dividend factor, implies that the economy

and income are expanding, albeit slowly. Sequestration will dampen the growth over the

short-term, but will not lead an outright recession.

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Percent of REALTORS Reporting Appraisal

Problems in Past 3 Months

Contract Cancelled Contract Delayed Negotiated to Lower Price

Feb 2013: 30%


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New Home Sales Positive

Ken Fears, Manager, Regional Economics and Housing Finance

The figures for new home sales, contracts and not actual closings, were very positive today. New home sales in January jumped 15.6% from an upwardly revised December figure of

378,000 (vs. 369,000 initial estimate).

Relative to last year, new home sales in January were 28.9% stronger, but the median pricewas only 2.1% higher. The median home price for new construction in January remained

30% higher than the median price of existing home sales.

While construction has ramped up in recent quarters, inventories continued to edge lowerreaching 4.1 months in January. That is the 12th consecutive month below a supply of 5

months and the lowest since March of 2005.

Continued growth of new sales will help to stimulate new construction which is good for theeconomy and employment. However, only so many new homes can be sold as long as

inventories remain tight and construction lags to keep up with demand.
http://economistsoutlook.blogs.realtor.org/files/2013/03/030113d.pnghttp://economistsoutlook.blogs.realtor.org/files/2013/03/030113c.pnghttp://economistsoutlook.blogs.realtor.org/files/2013/03/030113b.pnghttp://economistsoutlook.blogs.realtor.org/files/2013/03/030113a.png


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Comments From REALTORS

Jed Smith, Managing Director, Quantitative Research

REALTORS continued to report that lack of inventory, tight financing, appraisal issues,

and regulatory/economic issues are constraining the current housing recovery.

1. Low Inventory/multiple biddingInventory remains tight, with increased multi-bidding. Investors, who typically pay cash,

frequently win against first-time buyers. REOs do not appear to be coming to the market

sufficiently to meet demand. Sellers are reported as waiting for prices to pick up further. There

are reports of homes selling above asking prices.

The real estate market is definitely picking up, but it seems that that short sale and repoinventory is at a minimal. We are seeing a rise in single home prices, even though they are still

low. A seller who has owned a home for five years or less still owns a home that is of less value

than when purchased. Lack of inventory continues to create pressure on buyers to make decisions and offer reasonable

prices.

At least 80% of new listings experience multiple offers. Most have all cash or very strong buyerswho are bidding.

Banks need to stop holding inventoryand drop the idea/plan of bulk salesthis is eating up whatlittle inventory is out there and squeezing out the first time home buyers and pushing up the

price of homes again out of reach for many.
http://economistsoutlook.blogs.realtor.org/files/2013/02/22613a.png


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2. Tight Financing/CreditAccess to financing continues to be perceived as tight. The process of obtaining a mortgage

remains protracted, especially for short sales, causing delayed closings and risking cancellations.

There are reports that banks are disapproving loan applications of those with reasonably good

credit scores and are requiring larger down payments.

Loans are some hard to get now even with individuals that have great credit, good income, etc. Banks are too tight in credit scores. Getting buyers approved is a nightmare. Banks are taking at least 90 days.

3. Appraisal issuesThe most common reports are about out-of- area appraisers who are reported in some cases

to have poor knowledge of local conditions. Another issue is the demand for unusual repairs by

some appraisers.

Appraisers should be knowledgeable in the area they are doing the appraisal and not out oftown appraisers who know nothing of the trends.

Appraisals are taking a long time and received after the loan deadline date. Appraisers now are doing more than placing a value on a home. They are becoming pseudo

home inspectors and calling out repairs that haven't been an issue before.

Appraisers shouldn't see sales contract; the appraisal should be based on their market analysis.

4. Regulatory and Economic IssuesREALTORS expressed concern about the adverse effects of fiscal/financial regulation and

the state of the economy.

Not enough jobs available to bring in buyers. Slowdown until the sequester - lots of federal and military jobs in my area.

realtors® confidence index february 2013 report

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