recessionDallas was among nine metros where the bulk of home values have hit pre-recession levels, affordability is hampering one age group in particular from purchasing homes, Zillow is making yet another bid toward world domination, and mortgage rates are ticking up — all this and more in this week’s real estate news roundup. (more…)

home sales

(Graph courtesy Zillow)

Foreclosure starts are up locally, Dallas-Ft. Worth market continues to significantly outperform all other cities in the state when it comes to home sales, and several local cities and towns are among the top places in Texas to live.

We take a look at all of that and more in this week’s roundup of real estate news. (more…)

Property For Rent

To rent or buy. This is a topic swirling among my 30-something friends and seems to be in constant discussion.

Based on a brief survey CandysDirt.com conducted on a group of 25 to 40 year olds, results showed that 25 to 30 year olds are significantly more likely to rent compared to any other age group surveyed. This information provided me with a resounding “duh.” This age group is made up primarily of college graduates and young adults just starting out. As one renter put it, I’m a “recent college graduate who makes below poverty level.” Which is shown by 40 percent of our renters paying less than $1,000 a month in rent.

Other reasons people choose to rent include:

  • Lower-than-average rental rates
  • Mobility, or plans to move for various reasons
  • You are in an astoundingly expensive housing market such as Malibu or Breckenridge

The downsides of renting begin with the security deposit. Although most are returned after the contract has ended, it is out-of-pocket money. The yearly costs of rent and renter’s insurance also stack up the price. Opportunity costs can put renters behind when they eventually go for their first home purchase since they haven’t been building credit and investing in a property.

0420_price-reduced-house-sale-sign_485x340

But what about FHA loans? Won’t that help renters get some momentum with the more conventional loan process? Yes and no. Down payments with a FHA can be as high as 10 percent, which is still difficult for our under 35 group. These loans also prove more difficult when it comes to choosing a home for purchase. The limitations on the maximum purchase price have made it more difficult for some buyers to even qualify in more expensive housing markets, or highly sought-after ones such as the Park Cities.

According to our survey, 35-40 year olds are twice as likely to buy rather than rent, that is, if they can qualify for a loan. September 2013 data from Zillow, reports that three out of 10 Americans are unlikely to qualify for mortgages. Typically, the better mortgage rates are kept for borrowers with credit scores of 740 or higher. Only around 40 percent of Americans fall into that category.

On the flip-side, if you’re able to secure a mortgage and purchase your home, the yearly costs, including maintenance and improvement, can be substantial. Wait, you have a new job and need to move? Now to sell your home. People who use a Realtor will pay as much as 10 percent of the selling price in costs associated with selling. Let’s add on the cost of the inspection and a pre-sale facelift. Have out your calculator? Relocation costs, and exactly how long will you be sitting on that home of yours?

Regardless of age, 55 percent of those surveyed are putting their money into a home as an investment rather than renting. Owning provides more stability and an opportunity to accrue equity. Of those surveyed, most responded that they would rather put their time and money into a home that is theirs. An obvious conclusion. As a 30-something myself, I am not at all surprised by the narrow gap. Renting provides more flexibility for entrepreneurs, families with small children, and frequent travellers or jet-setters.

Renting may seem to be a waste of money to some, but there can be lower maintenance required as well as a welcome tax break. With loan qualifications like they are, some would love to buy but just aren’t able to. Renting becomes one of the only option and also requires less commitment.

Of course, you could always move in with your parents …

photo (26)Candace Tharp is a real estate-obsessed former food writer who has blogged about tacos, cupcakes, and haute cuisine before joining the team at CandysDirt.com. Have an interesting story to share? Contact her at candacetharp@hotmail.com.

Brutal Chicago Winter

OK, visualize a brutal Chicago winter. Snow, slush, and gray everywhere, no parking so you have to hike to and from the El everywhere. Boots and coats and a monochromatic landscape that has been known to drive some people up the wall.

Now, imagine you’re selling your home. Would you want tons of people tromping through your house with goodness-knows-what frozen to their soles? Imagine the salt stains on your rugs! And you’ll need to showcase all of the architectural details, so your thermal drapes on your windows will have to be flung open. And can you imagine being displaced several times a week for showings?

In a word: Yuck!

But imagine you’re a buyer and you’re viewing a home during a cold and snowy day, and you walk into a listing behind an agent who immediately turns on the gas fireplace in this cozy beauty:

Hearth Rug

In another word: SOLD!

According to research from online brokerage Redfin, winter is the best season to sell a home. Sounds counterintuitive, doesn’t it?

 Redfin analyzed homes listed from March 22, 2011, through March 21, 2013, and found that those listed in winter have a 9 percentage point greater likelihood of selling, sell a week faster, and sell for 1.2 percentage points more relative to list price than homes listed in any other season.

What the what? Now, “winter” according to Redfin, is Dec. 21 through March 21. By March, we’re usually back up in the 70s here in North Texas, and our market tends to get really active at that time, which is usually when Peeps hit the shelves, according to Re/MAX About Dallas Realtor Ken Lampton.

But according to Redfin, it’s not the season that really matters, it’s how motivated the buyer is. So while more people list in Spring and Summer, buyers tend to be more motivated in the winter.

“There are plenty of people who need to buy a home in the winter, whether it’s because of a job relocation or major family change, like a new baby. These buyers want to get into a home quickly, and are sometimes willing to pay top dollar,” said Paul Stone, a Redfin real estate agent in Denver.

Of course, part of it has to do with the perception of the economy, too:

An anticipated rise in mortgage rates is another reason why it may be advantageous to list your home this winter. According to Redfin economist Ellen Haberle, “The Federal Reserve has signaled that it plans to start reining in its stimulus program ‘in the coming months,’ which will push mortgage rates up. For many buyers, this expected policy change is motivation to strap on their boots and find the right home before rates increase, regardless of the cold weather.”

What do you think?

NB_23aikmanhouseWell we cannot blame this one on the Republicans: the Dallas real estate market, which had been in a heated frenzy ever since about January 2, has finally cooled heels a bit. It started on Labor Day, Ebby agent Kay Weeks told Steve Brown, when higher mortgage rates and economic uncertainties cooled the market as much as we all grabbed jackets this week for the first time.

We know sales of pre-owned homes in Dallas are up more than 20 percent this year. Prices in many neighborhoods have jumped by double-digits. Troy Aikman sold his home on Highland Drive to Michel and Tiffany Moreno, bought a home on Normandy and then just picked up a tear-down on St. Johns.

3801 NormandyTroy Aikman St. JohnsLike I said, everyone was buying houses.

But now agents say that looney, frenzied pace that kept them rolling from closing to closing has chilled somewhat.

“We have seen it really since Labor Day,” said Kay Weeks, a top sales agent for Dallas’ Ebby Halliday Realtors. “We are not seeing the open floodgates of business we have experienced from January to July.

“It’s become a much more reasonable market, and more normal.”

Weeks said real estate agents in the Dallas area have plenty of business and the market is strong.

“We are still getting multiple offers if a home is priced right,” she said.

There are fewer buyers looking, and listings are taking longer to sell. Or, perhaps I should say, selling in a more normal amount of time.

Lusting for Listings

Inventory is still at about 1.5 ish months in most parts of town, while total pre-owned single-family home listings in North Texas were 14 percent lower this September than they were last, this from the Real Estate Center at Texas A&M University.

Joan Eleazer of Briggs Freeman Sotheby’s International Realty, told Steve that inventory is still a big issue, but she expects a strong fall and winter market.

“We just sold two really big properties in the Park Cities,” she said. “The buyers are still out there paying cash.”

Cash, yes, and a lot of homes are still moving without ever hitting MLS.

Is The Sweet Sale Hot Spot Gone?

Many sellers want to know the best time to sell, of course, and want to jump in at the perfect time. Mortgage rates are still low by historic standards, even though they have jumped about a point from last year. And they may go up — I will be at Forecast 2014 and let you know what the experts think. We have heard from the guys at Texas A&M that this would happen, the market would temper off. Personally, I do not think that is a bad thing.

First of all, values have bubbled up from the Park Cities to Preston Hollow and Lakewood, still one of the hottest ‘hoods in town. Last CoreLogic report had us up 10% YOY. There is nothing wrong with a less frenzied market as long as those values stay strong. Values should hold because there isn’t that much inventory. Land prices in the Park Cities continue to wow, and builders are alive again. Interestingly, I was in Southlake today and out of 10,000 homes in a community of 26,000 people, only 152 homes are for sale.

“I have heard that the hotness factor may have eased a bit since the summer,” said D’Ann Petersen, an economist with the Federal Reserve Bank of Dallas. “I think it could be partly seasonal, but I do think that is more normal for North Texas.

“A less hot market is not a bad thing,” she said. “North Texas is benefiting from good job growth, population growth, and both our housing and apartment markets are healthy.”

Would you rather market your house now, when values are up, against less competition, or market it when the rest of the herd is selling?

case shiller-BG093_homepr_20130730104153_MGWe got some more good news out of Case-Shiller this week, but we were quick to be warned not to get too excited. I swear, will it ever be Miller Time?

Dallas-area home prices rose a record amount in June, 8% over last June, but rising mortgage rates, the growing mess in Syria, and economic QRM”ick” could end our appreciation party.

What Standard & Poor’s/Case-Shiller Home Price Index told us Tuesday: prices for Dallas-area single-family homes, pre-owned, not newbies, increased 8 percent in June from a year earlier. Dallas is one of the few places in the country where prices have surpassed their pre-recession peaks.

That was below a national increase of 10.1%, because, remember, our market never went as bust as others did. So the fact that we were below the national average — by a lousy 2 points — is no biggie. D’Ann Petersen of the Dallas Federal Reserve says our home prices are less volatile than U.S. prices, and we are seeing larger than average price gains because sales are so strong.

The median price of a home in Dallas is now about $181,000, up 11.5% from a year ago. Affordable? Yes, but nudging higher to $200,000. Maybe that’s why earlier this month, Trulia.com put Dallas on a list of the nation’s 10 most overheated housing markets. Trulia chief economist Jed Kolko said Dallas homes were overvalued by 4 percent, but he also sees a cooling-off period, and he was more concerned about Midland where you cannot even get a HOTEL ROOM. Other experts, like IHS economist Erik Johnson, says U.S. housing inventory shortages will only get worse. So there is this ying and yang: mortgages inching up, the future demise of Fannie Mae and Freddie Mac, but fewer homes to choose from.

Looking at the list, you can see how cities hit the hardest during the bust made the biggest leaps up in values. Vegas is looking hot again, and in fact, I’ve heard jobs in Vegas are opening up. Home prices jumped 24.9 percent in Las Vegas, 24.5 percent in San Francisco, and four other cities — Atlanta, Los Angeles, Phoenix and San Diego — saw prices rise 19 to 20 percent.

Dallas and Denver are the only cities in the index to hit an all-time high in June.

Dallas posted smaller real estate gains for June than for May. Dallas home prices rose 2% from April to May, but only 1.7% from May to June. June is usually a huge real estate transaction month, but I suspect the market has been so frenetic since January, it ramped out June sales to earlier months. Inventory also continues to be a problem.

Good news is the number of foreclosed houses for sale in Dallas is down more than 30% in June, measuring from the worst foreclosure period of the recession, this from CoreLogic Inc. Good news for the economy, bad news for some mortgage companies and law firms.

It was low interest rates — and jobs — that jump-started homebuyers starting in January 2013. But the supply of homes for sale has not been able to keep up with demand, driving up prices. And interest rates are inching back up, oh so very gradually, getting closer to 5%. It would take interest rates to jump up to 7% before some people felt knocked out of the market, someone in the mortgage world told me this week, but still that inventory void could keep values up.

John Burns of John Burns Real Estate Consulting told the Dallas Morning News that in general, the West is doing better than the East in terms of real estate, with “huge differences by geography.”

“Places such as Phoenix, San Francisco and Texas have the strongest markets because of supply constraints, he said.”

“The Texas economy is booming in building,” Burns said. “The market is on fire, and a lot of it is based on oil and gas.”

The California market is seeing huge price appreciation due to very limited supply of new homes. Home prices below historical averages in Las Vegas, Chicago, Atlanta and Tampa, Fla., are attracting investors. The Northeast is still dealing with a backlog of home foreclosures — partly because a court proceeding is required. Here are some of Burns forecasts and observations about the U.S. housing market:

Home prices: He sees high single-digit price appreciation starting next year and returning to more “normal” affordability levels in 2016 or 2017. Home prices will rise 10 percent to 11 percent this year, 6 percent in 2014, 4 percent in 2015 and 1 percent in 2016.

Homebuyers: Entry-level home buying is slowing because the most qualified buyers already have bought, not because of rising mortgage rates. High multiple car payments are keeping some people from qualifying for a home mortgage.

Apartments: Ten major U.S. cities have a high supply of apartments, including Austin, Dallas, Houston and San Antonio. More apartments than single-family homes are being built in Austin, Burns said.

U.S. housing permits: Burns expects single- family housing permits will grow to 805,000 and apartment permits will rise to 436,000 in 2014 — still below historical levels.

I like this Burns guy. Apartment construction is out of control. Agree on first time home-buyers: first the Obama administration embraced them with a first-time homebuyer’s credit, now it’s saying “screw you” as it prepares to dismantle Fannie Mae and Freddie Mac. After all, it was Bill Clinton who, in 1996, decided that everyone deserved a home whether they could afford it or not. Kind of like how President Obama thinks everyone deserves health care. October will be a very interesting month.

Let’s see how on target he is with those predictions…

Home price index
Change in home prices in June from a year earlier:
Las Vegas 24.9%
San Francisco 24.5%
Los Angeles 19.9%
Phoenix 19.8%
San Diego 19.3%
Atlanta 19.0%
Detroit 16.4%
Miami 14.8%
Portland, Ore. 11.8%
Seattle 11.8%
Minneapolis 11.5%
Tampa, Fla. 11.1%
Denver 9.4%
Dallas 8.0%
Charlotte, N.C. 7.8%
Chicago 7.3%
Boston 6.7%
Washington 5.7%
Cleveland 3.5%
New York 3.3%
Composite 12.1%
SOURCE: Standard & Poor’s/Case-Shiller

 

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DollarBillFanThis caught my eye in the Wall Street Journal last week: “more than half of all homes sold last year and so far in 2013 have been financed without a mortgage, according to an analysis by economists at Goldman Sachs Group.”

According to the analysts, 20% of all homes sold before the housing crash were “all-cash” sales, or around 30% of sales by dollar volume. But that has changed dramatically over the past seven years. Now the all-cash share of home sales has more than doubled, increasing by more than 30 percentage points.

Where did they get their numbers? Goldman scrutinized home sales figures from the Census Bureau and the National Association of Realtors and mortgage-origination data from the Mortgage Bankers Association and Lender Processing Services.

This explains why home sales have jumped over the past two years despite more hoops to jump through to become qualified for a mortgages, and the declining mortgage application index. Today Wells Fargo reports laying off 2300 employees due to increases in mortgage rates, which are stymying re-fis.

Who is making all these cash purchases? Investors, foreign buyers, and wealthy homeowners that likely do not want to go through the hassle of getting a mortgage. Some are downsizing to smaller homes equity rich before closing on a sale. Others are loving real estate as an investment more than the stock market. We sure know how lending standards have tightened up since the housing bubble. Banks now scrutinize borrowers’ tax returns and bank statements to verify their incomes and the source of their down payment, and the self-employed have been targeted.

I know of a lot of cash deals in Dallas, tell us what you are seeing on the real estate streets.

 

Bernanke Fed

Interesting times for the Dallas real estate market as several neighborhoods are seeing homes sell fast for thousands more than they would have just 18 months ago. But with the Federal Reserve toying with interest rate changes, will next month’s forecast be far less optimistic than the June breakdown from Local Market Monitor?

“Low Risk” is how Local Market Monitor is characterizing our market when it comes to real estate investment. Home prices in the Dallas-Irving-Plano area are forecast to grow 4 percent in the next 12 months.

But could interest rate volatility put a damper on that growth? According to this piece by HousingWire, interest rates are on a dramatic upswing:

Mortgage rates are skyrocketing with one real estate firm reporting a 50-basis point hike for the 30-year, fixed-rate mortgage in just the past week.

That honor goes to Zillow, which released data showing that on Tuesday the 30-year, FRM hit 4.38%, up 50 basis points from seven days ago.

A week ago, the same mortgage rate came in at 3.88%, according to data from Zillow.

And Zillow ($56.30 0%) isn’t the only one reporting high rates. Last week’s Freddie Mac 30-year, FRM came in at 3.93%, while Bankrate data showed mortgage rates at 4.12%.

Yikes! I guess if you’ve sat around waiting to refinance or buy as interest rates bottomed out, you missed your window. Still, job growth and the expanding population of the Dallas area are keeping Realtors busy.