Tough Times Ahead

In a report, CoreLogic economists, led by Chief Economist Dr. Mark Fleming, analyze the current housing market conditions, including why home sales are not increasing, in part, because of limited inventory of desirable homes and buyers not finding what they want to purchase.

Key findings in the CoreLogic May MarketPulse include:

>> Cash is all the rage in the purchase of condominiums. As of January 2014, Florida and Nevada had the highest U.S. cash sales share for condos, with shares of 81.2 percent and 80.5 percent respectively.

>> The U.S. Census Bureau, the National Association of Realtors and the Mortgage Bankers Association all indicated that March home sales slowed further, emphasizing the lack of available inventory could be to blame.

If we analyze the situation further, home sales fell by 2 percent year over year in April 2014 to a non-seasonally adjusted annual sales pace of 5.10 million, 0.5 percent higher than the 5.07 million pace reported for March 2014. Despite the decrease in total home sales, sales of existing homes increased by 10 percent year over year and sales of newly constructed homes increased by 7 percent. The decrease in home sales came from distressed sales, which fell by 50 percent year over year.

After reaching a trough in August of 2013 of 375,000 properties, the number of real estate owned (REO) properties increased 15 percent to 430,000 as of March 2014. The increase in REO properties was broad based, rising in 46 states. While the increase was moderate nationally, some states had large increases. Idaho led the way with the stock of REO properties nearly doubling between August 2013 and March 2014.

Are We Poised For Broad Market Recovery?

*Are We Poised For Broad Market Recovery?*
**New Data Looks Good**

***Veros Real Estate Solutions, a provider of enterprise risk management, collateral valuation services and predictive analytics, has announced that analysis of its data shows compelling evidence that the national real estate market has hit bottom and is now in a full recovery. This is the conclusion of the company’s VeroFORECAST real estate market forecast for the 12-month period ending December 1, 2013, updated quarterly and covering 975 counties, 335 metro areas, and 13,586 zip codes. Here’s the scoop:

****The forecast update shows significant improvement on a national basis, indicating that on average the top 100 metro areas can expect 1.2 percent appreciation over the next 12 months. This is the second quarter in a row where this index has shown forecast appreciation. Highly notable is the re-emergence of several very strong market forecasts, with Phoenix appearing again as the top market with over 10 percent annual appreciation predicted. This is the first time since 2006 that Veros has forecast double-digit annual appreciation in any market. In addition, the depreciating markets are becoming less severe, with the worst markets in the -2 to -3 percent range, which is a typical level of depreciation of the poorest performing markets even during healthy market periods. For the first time since the recession began, on a national level, two-thirds of all markets are expected to either be flat or appreciating during the coming 12 months.

****Phoenix, one of the markets hit hardest during the downturn, continues to show strength in this quarter’s forecast, building on its top ranking from the past two quarters to be the market leading the recovery. This revival is a result of its drastically reduced housing supply, which has plummeted by 70 percent from its peak. “Great affordability and low interest rates are also causing significant demand,” states Eric Fox, Veros’ vice president of statistical and economic modeling. “The low supply and high demand, in conjunction with the Phoenix area’s lower unemployment rate of 6.8 percent, compared to the national unemployment rate of 7.9 percent, sets the stage for it to be 2013’s top performing market.”

****Following Phoenix, the second strongest forecast market is Midland, Texas, where a forecast appreciation of 9% is expected during 2013. The Midland unemployment rate is a very low 3.4 percent, indicating a booming economy primarily due to the oil sector, and record low interest rates are also contributing to the market’s price increases. Third is Miami at nearly 8 percent appreciation, where the housing supply has also dropped nearly 70 percent from its peak, making affordability better than it has been in nearly a decade and ushering in demand from international buyers and from population growth. Rounding out the top five are Tampa and Denver, both expected to appreciate between 6 and 7 percent during the next year.

****“The Tampa housing inventory has dropped over 60 percent from its peak in 2007, while the Denver housing supply has dropped 70 percent from its peak in 2006, accelerating demand,” Fox says. He notes that the activity in Denver is enhanced by an economy that is attracting growth in the energy and technology startup sectors, although unemployment is only slightly better than the national average.

****Florida and Texas are looking particularly strong for appreciation with Midland, Miami, Tampa, and Cape Coral in the top 10.  California is again showing improvement, with San Jose, San Francisco, and Los Angeles also appearing in the top 10 once more.

****The majority of the markets expected to perform poorly are in the Northeast portion of the U.S., with much of New Jersey, eastern Pennsylvania, Connecticut, Delaware and downstate New York among the weakest areas. Unemployment remains a key discriminator between the top 10 and bottom 10 markets, as illustrated by the jobless rate in Poughkeepsie, above the national average at 8.3 percent. With unemployment, increases in the foreclosure inventory generally follow. The unemployment rate in Allentown, Pennsylvania is above the national average at 8.7 percent and has been rising recently, while the supply of homes remains relatively high. The unemployment rate in Norwich, Connecticut, is above the national average at 9.2 percent and has risen to record high levels in the last decade. The foreclosure and mortgage delinquency rates have increased during the previous one-year period, although they have recently flattened.

****“Overall, the recovery in the housing market is forecast to continue to accelerate,” says Fox. “We have been consistent in saying that the recovery will be lengthy and gradual, and market-by-market. Now we are finally ‘over the hump’ at a national level with appreciation being the forecast norm instead of depreciation, although some markets are still forecast to show signs of weakness.”