realtors® confidence index june

7/31/2019 REALTORS Confidence Index June

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Realtors Confidence IndexReportandMarketOutlook

June2012EditionBasedonDataCollectedJune25July3,2012

NationalAssociationofRealtors

ResearchDepartmentLawrenceYun,SeniorVicePresidentandChiefEconomist


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Table of Contents

Summary Real Estate Markets Continue to Recover..... ..... .3

Realtor Confidence Index: Current Conditions..3

Realtor Confidence Index: Six Month Outlook..5

Section 1: Market Conditions

Single Family Properties: Confidence Stabilizes......7

Townhouse Properties: Confidence Continues to Build Up.....7

Condos: Confidence Heading Towards Moderate.....8

Sixty-four Percent of Realtors Report Constant or Higher Prices on Recent Transactions

Compared to a Year Ago ....8

Eighty-six Percent of Responding Realtors Expect Constant or Higher Residential Prices

in the Next Year9

Buyer Traffic is Rising. Seller Traffic is Flat...9

Time On the Market is Declining.....10

Distressed Sales at 25 Percent of Market ....11

Distressed Real EstateBelow Market Prices....12

Property Condition Also Affects Selling Price of Distressed Properties.....12

Section 2: Buyer and Seller Characteristics

Cash Sales: 29 Percent of Residential Sales........13

First Time Buyers: 32 Percent of Residential Buyers .........14

Relocation Buyers: 15 Percent of Residential Market..........14

Residential Sales to Investors: 19 Percent of Residential Market... 15

Second Home Purchases: 12 Percent of Residential Market............15

Mortgage Down Payments....16

Realtors Continue to Report Rising Rents for Residential Properties....16

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

Section 3: Current Issues

AppraisalsA Continuing Problem.17

Credit and Lending Conditions.....18

Section 4: Recent NAR Articles

Homebuilding in the Sweltering Summer Heat Lawrence Yun......20

Housing Foot Traffic -Ken Fears............22

Commercial Investments Advance in First Quarter 2011George Ratiu.23


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3

SUMMARY

Real Estate Markets Continue to RecoverGay Cororaton and Jed Smith

TheRealtors Confidence Index (RCI) report provides monthly indicators on current

conditions and the outlook for the residential real estate markets. The report summarizes

information pertaining to Realtor confidence, price trends and expectations, buyer/seller traffic,buyer profiles, and issues affecting real estate. The June edition is based on responses of over

3,400 Realtors to a survey conducted for the time period June 25 July 3, 2012.1 Given that all

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

The respondents comments generally indicate that the real estate markets around the country

are continuing their recoveries in terms of sales and price2.

Realtor confidence about current market conditions for all types of residential property wassustained in June after a rapid buildup earlier in the year.

The RCI-SF (single family) current index is at 57.9. The level of confidence in the markets for townhouses and condominiums is still generally

weak, but the indexes are trending up, which indicates that a greater proportion of Realtors

have moderate to strong expectations. An index of 50 reflects a medium level of confidence.

Prices continue to firm up with 64 percent of Realtors reporting constant or increasingprices compared to the same time a year ago.

Looking forward, 84 percent of Realtors expect constant or rising prices in theforthcoming year.

1Therewere3,415respondentstotheJunesurvey.

2Allreal estate is local, so comments were varied, diverse, and in some cases contradictory depending on the

respondents location.

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

June2012Realtors ConfidenceIndex

CurrentConditions

SF TH Condo

SF: 57.9 TH:37.5 Condo30.6


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There is strong buyer interest but not enough listings: buyer demand is reported to begrowing faster than supply, and many respondents are reporting multiple offers. The buyer

traffic index is at 60.01, with the seller traffic index at 41.22.

The percentage of Realtors reporting distressed (foreclosed and short sales) property saleswas stable at 25% , compared to approximately a third a year ago

However, a lack of inventory for sale, major problems in obtaining mortgages on a timely

basis, and appraisals that do not capture the current state of the market were reported as having a

negative impact on the housing recovery:

There is a reported lack of inventory in a number of areas around the country. The mortgage approval process is reported to be exasperatingly slow, and lenders continue to

impose substantial information requirements on potential borrowers, tending to delay the

process. The mortgage process is reported as especially protracted for short sales.

Appraisals are reported to be coming in at unrealistically low levels relative to the underlyingmarket conditions, not reflective of actual market values. Respondents reported thatappraisals do not recognize that market prices are increasing.

Respondents reported extended time requirements to close foreclosures and short sales.This monthsRCIsurvey results confirm the trends reported in the NAR data for Existing

Home Sales (http://www.realtor.org/topics/existing-home-sales/data ) and the NAR EconomicOutlook (http://www.realtor.org/sites/default/files/reports/2012/economic-forecast-2012-05-

30.pdf), which outlines an economy expected to grow at 2.2 percent in 2012 (3.0 percent in

2013), creating 2.1 million jobs in 2012 (3million jobs in 2013).

The graph for Total Home Sales on a twelve-month roll (i.e., total sales for the currentand previous 11 months reported monthly) shows a market with sales growth projections for

Existing Home Sales. In addition, a modest improvement in home prices is expected, based on

continued economic expansion.

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ExistingHomeSales: ActualandForecast

Outlookfor2012: 4.7MillionHomeSales

TwelveMonthRoll Forecast


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5

Market Outlook

Realtors have moderate to strong expectations about the direction of the housing market

for the next 6 months. The sixmonth expectations index for single family home sales is above

50 while the indexes for townhouse and condominiums continue to rise. An index above 50indicates that respondents expressed moderate to strong expectations (strong=100; moderate

=50; weak=0) for the outlook.

0

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PricesbyMonth,NotStatisticallyAdjusted

OutlookProjectingImprovement

MedianPrice Forecast

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

June2012Realtors ConfidenceIndex

SixMonthOutlook

SF TH Condo

SF:

61.4

TH:41.6

Condo

35.9


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Continued increases in residential sales are projected along with continued priceimprovement, although both sales and prices will vary from market to market. There continue,

however, to be risks to the market outlook:

Potentially Positive Factors/News

Falling Inventories of homes for sale: Months supply of homes for sale as of May was at6.6 months compared to approximately 10 months in 2010.

The lower level of Distressed Sales continues, indicating continued if slow marketimprovement.

Home Affordability: Continued low interest and inflation rates contribute to highaffordability.

Demographics: The U.S. population has expanded substantially in the past 10 years, butsales are at a level of approximately 10 years ago.

Potentially Negative Factors/News

The economic recovery continues to proceed at a slow pace: job creation is positive but notsufficient to absorb new entrants and the unemployed; the economy has so far generatedabout 80,000 new jobs each month in the last 3 months, but the economy needs to generate

about 250,000 a month to get back to 5 % unemployment rate.

The slowdown in economic growth especially in the Euro countries and the possibility ofrecession in Europe is as much a political as an economic issue. Our housing market andeconomic projections are based on muddling through the problem.

The potentially adverse economic effect of the fiscal cliff(expiration of Bush tax cuts andmandated spending cuts in the absence of legislative action) is also a political as well as an

economic issue. Again, projections are based on muddling through the problem.

Credit standards and information requirements imposed by financial institutions in mortgagelending continue to be excessively stringent, having a negative effect on closings and closingtimes.

What Does This Mean For Realtors?

The currently available data indicate that the residential real estate markets continue to

recover. Realtor confidence and price expectations are higher than was the case a few monthsago. Rising rental rates also have favorable implications for home sales. Time on market

continues to decrease. Prices and interest rates continue to be lower than has been the case in the

past. These are the reasons that we continue to view the outlook as favorable for home sales.

Given that the typical homeowner will occupy a house for approximately 8 years after

purchase and that home ownership is basically a lifestyle decision in addition to a financialcommitment, one can make a good case that this is a good time to buy a house, remembering thatstaying within a reasonable budget and prudent mortgage is important.


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I. Market Conditions

Realtor Confidence Remains Upbeat

TheREALTORS Confidence Index is an indicator of housing market strength based on a

monthly 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" (0

points). A score of 50 for the index is the threshold between strong" and weak conditions.Realtor confidence in the market outlook is presented in terms of the current market and the

market outlook for the next six months for single family, townhouse, and condo markets. Across

all types of indexes, the RCI is either above moderate (i.e., greater than 50 for single familyhomes) or continues to move towards moderate (townhouses and condominiums).

Single Family Properties: Confidence Stabilizes, Remains Above Moderate in June

Townhouse Properties: Confidence Continues to Increase, Approaching Moderate in June

0.0

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June2012Realtor Confidence

Currentand

Six

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CurrentConfidence Conf idence

in

Outlook

Current:57.9 Outlook: 61.4

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June2012Realtor Confidence

CurrentandSixMonthOutlook:TownhouseProperties

CurrentConfidence ConfidenceinOutlook

Current:37.5 Outlook: 41.6


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9/24

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10/24

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11/24

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12/24

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13/24

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14/24

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15/24

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16/24

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17/24

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18/24

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19/24

19


20/24

20

IV. Recent NAR Articles

Homebuilding in the Sweltering Summer Heat

On June 29, 2012, in Economist Commentaries, by Lawrence Yun, Chief Economist

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The weather heat map is all red today across the country. The best course is to stay indoors with

the air conditioner on, and postpone lawn mowing for another day.

Yet, there are construction workers with hard hats and hammers pounding away outside. In

reviewing home construction activity by each month, there is no discernible trend of holdingback construction in the summer in very hot places like Phoenix or Dallas. Homebuilding is

more impacted by market conditions of bubble and collapse, but not heat.

The following chart shows the raw counts of housing permits issued by each month in theGreater Phoenix area. Note that the big swings in data are over several years, such as the sharp

rise from 1982 to 1984 and the sharp decline from 2005 to 2010. The small month-to-month

changes are all but invisible in the bigger multiyear trend. A closer inspection of the monthly

data shows more building in March in some years, but also more building in July in other years.

There is nothing to indicate that workers want to cool off during summer.


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21

The same type of phenomenon of long-term dominating short-term weather trends is alsoobserved in Houston and Atlanta. If anything, there appears to be more activity in summer

compared to winter.

Though construction workers evidently can take on the heat, they are unwilling to freeze. There

are definite big seasonal swings in housing permits in cold weather cities such as Minneapolis,

Milwaukee, and Buffalo. Much more activity occurs in late spring to autumn before pretty much

going into hibernation in winter.


22/24

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23/24

23

CommercialInvestmentsAdvanceinFirstQuarter2011

ByGeorgeRatiu,Manager,Quantitative&CommercialResearchCommercialrealestatetransactionspostedgoodfirstquarterperformance.Salesvolume

totaled$51.4billion,a40percentincreaseofthefirstquarter2011.Retailpropertiesprovided

astrongboosttotheupwardtrend,rising89percentfromayearago. Capratesmovedlower

forapartment,retailandCBDofficebuildings.

DealscontinuedtoflowduringAprilandMay.Salesvolumetotaled$14.8billioninApriland

closedat$17.9billioninMaysecondhighestmonthlyvolumeoftheyear.However,Mayalso

representedthefirstyearoveryeardeclineinsalessinceNovember2009,down10percent.

Privateinvestorsremainedthedominantbuyerinthemarketduringthefirstquarter,

accountingfor42percentofacquisitions.Inatellingsignofthemarketsrebound,institutional

andequityfundswerethesecondmostactivebuyergroup,makingup24percentofdeals,

followedbyREITs,with15percentoffirstquartersales.Crossborderinvestorswerealso

active,with10percentofthemarket.

Thetopmarketsforinvestmentdealswerecoastal,withafewexceptions.NewYork

maintaineditsnumberonespot,followedbySanFranciscoandWashington,DC.

MostActiveMarkets

Market Vol.($Bil.) Caprate

1 NYCMetro $38.00 6.05%

2 SFMetro $15.30 5.94%

3 DCMetro $15.10 6.11%

4 LAMetro $15.00 6.33%

5 Chicago $10.60 6.69%

6 Houston $7.30 6.91%

7 Dallas $7.10 7.09%

8 Boston $7.10 6.81%

9

So.

Florida

$6.90

7.21%10 Atlanta $6.10 6.85%

Basedonlivedata;dealsvaluedat$10Morgreaterreportedincontractorclosedinpast12months

Source:RealCapitalAnalytics

Overthepastyear,distressedcommercialpropertieshavedeclined,duetoalargervolumeofworkouts

versusinflows. Apartmentsandhotelspostedthelargestdeclinesofoutstandingdistress. Justas


24/24

24

importantly,withtheexceptionofCMBS,alltheotherlendergroupsmanagedtoreducedtheir

distressedbalancesoverthepast12months. Giventhat2012isapeakyearformaturingcommercial

debt,especiallythatoriginatedin2007,thetrendsareencouraging.

Top25PropertySalesbyInvestmentVolume 2012.Q1

Transaction

Location

InvVol

($M)*

SF/Units

PPSF/Unit

1BankofAmericaBuilding Boston,MA 615.0 1,305,000 $471

2530FifthAvenue NewYork,NY 390.0 537,800 725

3fmrReliantEnergyPlaza Houston,TX 334.8 837,130 400

410East53rdStreet NewYork,NY 257.0 388,000 662

5HomerBuilding Washington,DC 252.0 421,901 747

6PerrySouthBeach MiamiBeach,FL 230.0 589 390,492

7350WMartCenterDr Chicago,IL 228.0 1,243,000 183

8TowersatWilliamsSquare Irving,TX 226.1 1,395,980 162

92FederalReservePlaza NewYork,NY 207.5 623,000 333

10FairmontSanFrancisco SanFrancisco,CA 200.0 676 295,858Source:RealCapitalAnalytics|ParalInterest

realtors® confidence index june

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