Rising home prices, homebuyer demand and less competition is making 2015 a stellar year to sell for many U.S. homeowners across the country, says Daren Blomquist, RealtyTrac’s vice president.
Blomquist points to three major factors behind the favorable climate for sellers:
1. Stronger demand coming from buyers: Sellers in many markets see strong demand from a larger pool of buyers, including first-timers, boomerang buyers (previous owners who lost their home to foreclosure), as well as traditional move-up buyers. The low inventory is sparking competitive offers.
Particularly of note: The number of borrowers using Federal Housing Administration (FHA) loans – typically low down payment mortgages often favored by first-time home buyers – is on the rise. It accounted for 23 percent of all single-family home and condo sales with financing in the first half of 2015. That marks the highest share since the first quarter of 2013, according to RealtyTrac’s Midyear 2015 U.S. Home Sales report.
2. Home prices are skyrocketing: Single-family home and condo sellers in the first half of 2015 sold for an average of 13 percent above their original purchase price.
“So far in 2015, [sellers] are realizing the biggest gains in home price appreciation since 2007,” Blomquist says. “In June, sellers sold above estimated market value on average for the first time in nearly two years.”
Median sales prices of existing-homes pushed above the previous 2006 peak to a record high in June, the National Association of Realtors® reported last week. The median existing-home price for all housing types was $236,400 in June – surpassing the peak median sales price set in July 2006 at $230,400.
3. Sellers have fewer competitive homes: Inventories of for-sale homes remain tight, forcing buyers to compete for a limited supply. Multiple bids are back!
Distressed sales – properties in the foreclosure process or bank-owned – accounted for 8 percent of all single-family and condo sales in June, the lowest monthly share since January 2011. In 2011, the share of distressed sales had reached a monthly peak of nearly 46 percent of all single-family and condo sales.
Source: “2015 Great Year to Sell,” RealtyTrac (July 22, 2015)
Recently released Commerce Department numbers confirm that the rebound in U.S. home construction gained steam last month as builders broke ground on more projects than at any time in nearly eight years.
4. Feds raising interest rates. “Housing is in a real sweet spot, moving higher but not dangerously so,” says Eric Green, head of U.S. economic research at TD Securities. “The housing market will be strengthening over the second half (of 2015). The Fed raising rates will not change that.”
However, a raise in rate may prompt buyers to buy now to take advantage of low rates.
Residential starts increased 0.2 percent to a 1.21 million annualized rate, the most since October 2007 – a gain that was led by single-family houses.
While a decrease in building permits means the industry’s progress will most likely be measured, its recovery from the Great Recession is set on such stable foundations as an improving job market and growing household formations, Green says, adding that its momentum will likely continue into next year.
Meanwhile, housing permits – a proxy for future construction – decreased to a 1.12 million annualized rate in July from 1.34 million the month before.
Source: Bloomberg (08/18/15)
5. New Closing Procedures: Effective October 1, 2015, new procedures will affect all financed transactions. According to the Florida Realtors®: Under the closing process changes [slated to take place October 1, 2015], which were developed by the Consumer Financial Protection Bureau, the HUD-1 settlement form, the Good Faith Estimate and the Truth in Lending Act disclosure form will be consolidated into two new forms: (1) Loan Estimate and (2) Closing Disclosure. The Closing Disclosure must be given to the buyer three days before closing, and if certain changes are made after that point, the closing would be delayed another three days. CFPB Director Richard Cordray spoke before Realtors earlier in the week, saying only three types of changes could lead to a closing delay: a change in the loan product (such as from a fixed-rate loan to an adjustable-rate loan), the addition of a prepayment penalty, or a change in the annual percentage rate of more than 1/8 percent (1/4 percent in the case of an adjustable-rate loan). Although only these three events would trigger a delay, settlement service experts who have studied the changes say other events could unintentionally force delays as well. For example, lenders will have to delay the closing if parties agree at the closing to make even small or routine changes to what conveys to the buyer. In addition, as a practical matter, lenders will need to get the Closing Disclosure finalized a week before the closing to ensure the buyer gets it within the three-day time frame. Cash buyers often times opt to obtain a mortgage because of the current, historically low rates. Therefore, they would also be affected by the above changes. You need to list with a competent Real Estate professional who has a company like EWM, versed in these new procedures with checklists in place, who will ensure a smooth transaction.